SMSF Education: Prepare Yourself Well Before Establishing an SMSF

Are you thinking about starting a Self Managed Super Fund (SMSF) and being part of the fast growing superannuation market? If the answer is yes, then you should answer these three questions in order to find out whether SMSF would be the right choice for you and get prepared.

What is the reason you want to establish an SMSF?

First of all, you should ask yourself where have you heard about SMSF or who recommended it to you. It is important to have someone close who can help you out throughout the process, or if not talk to a professional. In order to switch to an SMSF, you should have the knowledge and time to run it yourself or with the help of a low cost SMSF service provider and save a lot. Is the reason for SMSF a property investment you have in mind? Once you establish a worthwhile reason, continue to the next step.

How much money do you have to start an SMSF?

The recommended industry investment when starting an SMSF is $200,000. You can always start with less, however, this amount will make your fund more competitive with other funds.

Also, you should take into consideration the other costs which come along the initial investment. Only after all these calculations you will determine whether starting an SMSF will be a cost-effective option for you. The incidental costs are transferring money from one fund to another and potential loss of insurance coverage.

Are you setting an SMSF alone or with others?

An SMSF allows you to combine your super fund balance alone or with other people. This option is way better than what regular super funds offer, because you can invest the balance as a whole and each person have their own means within the fund. If you choose to set an SMSF with other three parties you should also be prepared for potential risks which might come into this option, such as: bankruptcy, death or closing the fund by one of the members.