Never too young: Start an SMSF at any age

We look at how the average age of SMSF account holders is falling.

You’re never too young to start thinking about your retirement nest egg, and it’s no different when it comes to a self-managed superannuation fund. In fact, there can be real benefits to getting in early.

You will need to tick one box: you need to be 18 years old in order to legally qualify as a trustee of an SMSF.

Start an SMSF at any age

A younger trend

While SMSF members have typically been older than other superannuation fund members, and have had higher average fund balances and incomes, research from the ATO’s self-managed super fund statistical report shows that the profile of an average SMSF member is changing.

In 2013, the median age of SMSF members in newly established funds decreased to less than 50 years old for the first time, and there was notable growth in the number of SMSFs established by those aged 35–44.

In 2016, some 43 per cent of all new SMSFs were set up by those younger than 44 years old, which comprised 17.5 per cent of the total number of SMSFs in Australia.

You’re never too young

The Financial Services Council’s State of the Industry report says one of the key drivers behind the increasing number of SMSFs being set up is a desire for personal control and greater investment choice. So the fact that younger people are increasingly attracted to establishing an SMSF indicates that younger people want to have control over their retirement income and they have a good understanding of the short-term issues versus the longer term opportunity.

No matter what your age is, the benefits of an SMSF can be the same for everyone – financial freedom, wider choice of investments than most superannuation funds, autonomy and the satisfaction of controlling your own future. The younger you begin, the more time you’ll have to build your investments and manage your SMSF, and maybe take advantages of those benefits over time.

To work out whether an SMSF will be right for you, the main considerations you’ll need to make are whether you are able to manage the legal, regulatory and tax requirements of an SMSF, and have enough know-how to take control of your own investment decisions.

Key considerations

An SMSF can have a minimum of two and up to a maximum of four adults aged 18 or older as trustees. So, depending on your personal situation, you may wish to consider the pros and cons of being added to an existing family SMSF as a trustee, or involving other family members in your own SMSF, or setting one up on your own.

Another consideration before setting up any SMSF is whether you think your SMSF can outperform a managed superannuation fund. Do you have the skills and knowledge to do a better job than the professionals? Or can you source this expertise – and will all the effort and expense be worth it?

While there are several rules of thumb bandied about, as mentioned earlier it is – in theory – possible to start an SMSF with any amount. In fact, almost a quarter of all SMSFs have less than $200,000 in assets.

You do need to ensure you have enough of a balance to make it viable, so the balance of your SMSF covers the costs involved in running it plus the investments you intend to make and any associated costs. When it all adds up, will you have sufficient money to take advantage of any potential cost savings associated with running an SMSF?

Younger people tend to have typically worked less so have less to invest, generally speaking, but there are always exceptions to the rule. As a younger person you have more earning years ahead of you, giving you the ability to add more to the fund over time, and try various investment strategies, even if your commencement balance is initially lower.

So while you might not be able to draw on your superannuation nest egg until you reach preservation or retirement age, it’s never too early to start thinking about an SMSF.

If you want to learn more about SMSFs, download an information pack. If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.

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