Written by Libby Shaw
When we think of retirement, we think of it as being something very far away in the distance. We don’t really think about what we’ll need to live comfortably when we’ve finished working. There was a story published recently by the News.com.au; which said that both men and women will have less than they need. At a conservative estimate people would have $15,000 less per annum than what they need.
With housing prices skyrocketing, fewer people can buy houses which means that they will be paying rent well into retirement and unfortunately, that means that they will need even more.
Without adequate retirement savings people will live in poverty and won’t have any type of lifestyle. They’ll just have the basics and not a lot else. The researched published by the media showed that joining a fund with just 1% extra return could result in an extra $250,000 at retirement. That’s a substantial increase in retirement savings.
Now of course, some people are self employed, which the media did not cover so if self employed people want to secure their retirement then they need to put away 9.5% just like an employer would.
But let’s return to the superannuation scheme you’re in. Of course there are managed funds and then there are self managed super funds, commonly referred to in shorthand as SMSFs. These are great in many ways because you save on fees and that means that in retirement you’ll have more to live on and be more comfortable.
If you are going to invest your money in SMSF then you need to be aware that you’ll be responsible for conducting the research into what the best products are. You’ll need to consider your situation and how long it will be before you retire. If you are close to retirement then it may be best to choose a conservative plan. A conservative plan will deliver lower returns however the risk is mitigated so you’re less likely to lose money in a market crash or banking collapse.
The other question to ask yourself before deciding whether or not an SMSF is right for you, is how much is in your existing scheme. If it’s more than $100,000 then according to the Sydney Morning Herald, you’re able to start your fund. Just like online share trading platforms, you can often manage your SMSF fund for around $1000 a year. These fees are slightly more than a managed fund however if freedom and flexibility appeals to you then it is going to be the right way to invest. you will have complete control of what products your money is invested in.
By taking an active interest in your super fund and retirement savings you are more likely to be conscious of a shortfall. Unfortunately, most Australians “set and forget” their super. This is even worse for women who often leave financial management to the men in their lives (there are other reasons why women end up with less in their superannuation fund, but we just don’t have the time to delve into those issues right now). If you aren’t aware of how much is in your super fund, how can you possibly take steps to increase the balance?
This last fact alone is enough of a reason to manage your super fund yourself and invest in an SMSF. It amazes me that people are so willing to let other people and businesses manage their money, and we’re not talking small change here. We’re talking hundreds of thousands, so if you want to control your money then an SMSF is right for you and you would be best to research your options.
Want to know about buying property in SMSF?
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