Too young for self managed super? Think again!
If you think SMSFs are only for baby boomers, think again. According to independent researcher Investment Trends, one in every four Australians planning to start an SMSF in the 2014 financial year is under 35. An even higher proportion plans to start an SMSF in the near future, with Gen Ys accounting for 46% of future SMSF investors.
So why are Gen Ys so interested in SMSFs? Here are some of the reasons why it could be worth considering an SMSF sooner rather than later.
1. Save on fees year after year
Traditional super funds charge fees as a percentage of your investment, taking around 1% - 2% of your hard-earned cash every year. That means you end up paying more in fees as your balance grows.
But with an SMSF, you generally pay the same flat fee year after year. For example, ESUPERFUND has a fixed administration fee of a year, which works out to less than 1% of a $80,000 investment. Grow your fund to $150,000, and your fee ratio shrinks to around 0.5%.
When you have 20 or 30 years of saving ahead, that can make a big difference. According to the Australian Securities and Investments Commission, a 1% difference in fees today could mean a 20% difference in your super payout in 30 years.
2. Keep it in the family
If that still sounds like a lot of money, remember that each SMSF can have up to four members. So you can pool your super savings with your spouse, your parents, your brothers and sisters - whoever you like. The same flat fee applies whether you have one member or four, so combining your super in the same fund means everyone saves.
3. Go your own way
When Investment Trends asked people under 44 why they chose an SMSF, 50% said it was because they wanted to control their own investments.
That's the beauty of an SMSF. It gives you total control over your super, with a huge range of investment options - from shares and property, to cash, term deposits, CFDs and more. You choose which assets to invest your money in, when to buy and sell, and how much to spend. So you can shape your strategy to fit your situation, rather than the fund manager's investment mandate.
4. Get started in property
Around thirty per cent of SMSF investors under 44 also said they chose an SMSF because they wanted to invest in property through their super. Unlike a traditional super fund, an SMSF gives you the option of investing directly in residential or commercial property and borrowing to do it.
There are strict rules on buying and using property through your SMSF, so it's important to do your homework before you invest. But at a time when many young Australians find property increasingly unaffordable, an SMSF can be a smart way to get into the market using your super savings.
Find out more
If you think an SMSF might be for you, read more about the benefits of running your own fund.
Before you start
An SMSF can be a great vehicle to take back control of your Super but an SMSF may not be right for everyone. We have conveniently summarised other factors to consider when contemplating setting up an SMSF here. We also assist you in understanding what is involved in the ongoing management of your SMSF via our Free SMSF Learning Centre here.
If you want to learn more about SMSFs, download an today.