Is a SMSF right for me? An interesting question and one that we often get asked when people come to see us. There are so many features and benefits that we love about a SMSF BUT a SMSF is not right for everyone.
There maybe a time where you might have had a SMSF for years, but due to a variety of reasons you would be better off closing it down and moving your investments into a retail or industry fund.
So I hear you ask when and why should I close down my SMSF?
A key reason for a lot of our clients to set up or run a SMSF is the desire to own property, and within an SMSF this can be an effective strategy. But when the time comes where you might want to sell that property, perhaps consider your super options also. There are a number of good options available especially now with so much fee pressure being applied to the larger platform providers where you can still invest and own your favourite shares, but without the compliance burden and paperwork of running a SMSF.
Many of the costs of SMSF’s are $ based rather than % based. This means that while your balance is larger, the relative % cost to run an SMSF can be relatively low however over time as you draw down your SMSF to fund your retirement your balance may get to a point whereby the fixed costs just don’t stack up.
Your SMSF balance gets to a point where the fixed costs just don’t stack up compared with what you could run a retail or industry fund for. As your SMSF balance gets smaller then the % to run it effectively increases. For example when you add accounting, auditing, ASIC fees, administration and investment costs. You might find that it is cheaper to continue receiving advice around your super and retirement planning, but in a more cost effective vehicle.
As we get older, we often start thinking about simplifying our lives and finances is one of them. Whilst running a SMSF in your 50’s, 60’s, and 70’s might have been the best option for you. As you start to get towards your mid to late 80’s an important issue comes up around your physical and mental health. So before this happens it’s great to start to plan how you will pass control of your wealth to those you care about, rather than having to do it in a hurry.
Often the death of a partner can trigger the thought process and desire to continue running a SMSF, as can a marriage breakdown. Sadly, one in three marriages end in divorce and when splitting a SMSF into 2, then consideration should be given as to whether one, both or either party should continue to run the fund.
As you can see, there are numerous reasons why you might consider winding up your SMSF. However, we highly recommend getting good advice prior to making that decision. By working with us we can develop a clear and well-structured plan as to the steps involved as there are many, the pros and cons, the costs, implications of ceasing any pensions may have and the outcome that will be achieved.
For a variety of reasons, over the past 12 months we have closed and opened a number of SMSF’s because of the circumstances of our client. Understanding what’s right for you now and into the future is a key focus for us to ensure you have the right strategy to take you to where you want to go. Come and talk to one of the JBS team if you have questions around whether setting up, continuing to run or closing down your SMSF is appropriate for you.