Explore the world of SMSF: How to Maximize Your Retirement Savings

By Ava Brown, August 5, 2016

Retirement Savings

Currently an SMSF is one of the most popular ways to save for retirement. The main reason why this is such attractive choice is because it offers control as well as flexibility and transparency. In fact, the Australian Government encourages people to take responsibility for their individual financial retirement goals and the perfect way to do that is with SMSF accounts.

SMSF or self managed super fund, is a special retirement savings plan which is used to accumulate money that will benefit the its members during their retirement. SMSF is one of the best ways to save for retirement because it allows you to manage your own investment strategy, reduce tax and obtain tax benefits, and control administration costs.

Self managed super funds are increasing in popularity with their superior performance over retail and industry funds. A proof for that are over a million Australians with a combined asset pool of more than $550 billion.

There are many benefits of having SMSF accounts, but in order to make your investments work harder you need to have a good strategy.

With an SMSF you can invest in property. Borrowing within the fund to acquire property is a big trend among SMSF holders and with the clearing up of some gray areas in regulation it is expected to rise even further. Funds can now draw-down on a loan in order to buy properties on multiple titles which are now an option for SMSFs. Also, updates on properties which were previously banned by SMSF restrictions are now considered “repairs” and not “improvements”.

Statistics show that nearly a quarter of direct property investment is in residential property. This is probably because fund trustees are going for higher yields to service investment loans on geared property. However, residential property is also attractive because of low volatility and long-therm capital gains. Buying their future retirement homes within the SMSF is another innovative strategy for retirement savings, tax and lifestyle.

Putting in as much pre-tax contributions as possible by family members is another strategy of some of the wealthiest funds. This includes anyone under the age of 65 as well as anyone between 65 and 69 years old that is still doing some paid work. Basically, funds with a maximum membership of four people can receive up to $700,000 per year.

Diversification is one of the most basic strategies. Some of the bigger funds have only 5 percent of their money in a single asset class as opposed to the smaller funds who usually have around 38 percent.

As far as stock strategies go, you may need to do a little investigation regarding which strategy best suits your current SMSF phase. For example, if you are not of pension age, it is better to hold on to stock in order to receive a 10 percent discount on capital gains tax. While it may not be wise to make all your investment decisions based on taxes, you should definitely be aware of them.