The team at Retirement Essentials is always interested in how our members seek advice on money matters. And which type of advice works best for you.
Last week we were contacted by Roger, and with his permission (and a change of names), we’re sharing some of the detail of his not-so-happy tale.
Roger has managed his own home handyman business quite well over the years. Now he’s 65 he has chosen to work just three days a week. He came to us with a concern about superannuation about which he felt he needed an independent view.
He’d been at a family barbeque a year or so ago when his wife’s younger brother (Sam) had promoted the upsides of establishing a Self-Managed Super Fund (SMSF). Sam’s experience had been really positive; he was enjoying his ability to control his own super savings and felt he was much further ahead than he would have been with his previous retail fund. At 47, he was looking forward to years of fast-tracking his savings and believed that the switch to the Self-Managed Super Fund had been the turning point.
Roger’s wife Anne was impressed by her younger brother’s positive experience, so Roger contacted the family accountant and started to explore establishing an SMSF by shifting funds from Roger’s current super account.
There are no hard and fast rules about who ‘should’ or ‘should not’ set up an SMSF. In fact there’s not even a general rule of thumb. Recommended amounts as a minimum asset base vary from $200,000 to $500,000. The Australian Securities and Investments Commission (ASIC) suggests a starting point of $500,000 and that annual costs could be about $13,900 to cover the establishment, ongoing administration and auditing fees.
As a sole trader, Roger had not prioritised paying himself super over the years, so his balance of $210,000 was less than the median amount for other men his age. Annie been an unpaid carer for her mother for years so she was one of the 30% or so of women with no superannuation whatsoever.
Conservatively, they could have spent more than $13,000 in total fees and establishment costs in year one of a Self-Managed Super Fund, so they realised that their rate of earnings would need to be very high going forward to recoup those costs and the additional administration fees each year. Not to mention the extra work involved. Their accountant seemed ambivalent when they asked if this was actually worth considering.
Ultimately, the decision rests with Roger and Anne. But they found it helpful to better understand the full fee structure and to project future earnings in order to decide how worthwhile this might be. They were also beginning to understand that for Sam, who earns a high income and has two investment properties, a SMSF is a totally different proposition.
Which brings us back to Retirement Essentials’ November 2023 Retirement Pulse and why we are hoping to learn more about where and how your seek advice.
There are many really useful retirement income resources in Australia. Which means that advice handed around at the family barbeque is probably NOT your best starting point.
Please help us help you by completing our 5-minute November 2023 Retirement Pulse today.
And if you, too, would like to explore more about ways to maximise your super, our adviser-guided consultations are a great starting point.