Three prerequisites of self-managed superannuation

Self-managed superannuation has long been a popular topic for people aspiring to take more control of their superannuation. And since the Royal Commission I’ve noticed an increase in enquiries from people wanting to start their own self-managed superannuation fund (SMSF).

I wholeheartedly encourage everyone to engage with their superannuation because for almost everyone it will be the largest component of their net wealth at retirement.

However, before considering a SMSF, you need to be able to emphatically answer ‘yes’ to each of these three questions:

  1. Can you accurately explain what superannuation is?
  2. Do you currently take an active interest in your superannuation?
  3. Is your balance more than $300,000?

If you answer ‘no’ to any of those questions, then a SMSF will cost you more in fees and time than an off the shelf fund. And you will make less money too.

As a SMSF trustee you have the responsibility for complying with all the superannuation laws. If you don’t understand superannuation, then being a trustee is dangerous. There are some responsibilities you can’t pay to outsource.

If your interest in a SMSF is to get more control of your superannuation, then the best first step is to invest the next 12 months in thoroughly understanding the options within your current superannuation fund.

Once you understand how superannuation works, next research the many off the shelf funds that give you access and control over a very wide variety of investments without taking on the responsibility of being a trustee. Many such funds cost less than running a SMSF and are a great choice, even for people with over a million dollars in superannuation.