Me and my self-managed superannuation

Me and my self-managed superannuation

I manage my own superannuation through a self managed superannuation fund (SMSF). I thought I would share my personal thoughts as to what works and what doesn’t work so well with respect to running an SMSF.

But firstly, my SMSF is administered by Rivkin Super and as a shareholder of Rivkin, I have a conflict of interest in writing this article. In the interest of balance, I will start with the downsides first.

Downsides

  1. I need to buy and sell shares myself

    On account of being lazy and able to blame someone else if a trade is executed incorrectly, I usually ask one of the Rivkin dealers to do my trading. Still, I am the one who needs to make the decision to place the trade and make sure it is done.

    I try and keep this simple by having a fixed dollar amount I wish to invest for each trade based on 6% of my portfolio (and I just use a fixed amount for that, not the daily balance), and the number of shares is obviously the dollar amount divided by the share price. Rivkin Securities dealers normally calculate this for me.
     
  2. Franking credits don’t appear until after the end of the financial year

    I love franking credits, however they don’t turn into cold hard cash until the end of the year and the fund’s tax return is done. I know they ultimately get returned to me, however the lack of visibility can be frustrating.
     
  3. Current balance can be incorrect

    In addition to franking credits not showing on my account balance when a dividend is paid, some other payments also fail to show up straight away. If a takeover has been agreed, but the proceeds not paid, a vacuum is left in my broking account until the funds are received. As a specific example, I hold an IOU from Gloucester Coal that will be paid in 2013. I know I will get it, but it doesn’t show on my broking account and I need to manually add it back in when I am working out the value of the fund. It’s annoying because it understates my balance!
     
  4. Paperwork

    Getting bombarded by company paperwork – especially when there is a takeover – is annoying. The environmental impact is ridiculous. Running an SMSF does involve paperwork and while we (Rivkin) try to minimise it, there will be paperwork.  

Upsides

  1. Control

    I get to say where the money is invested. My strong view is that it is my money for retirement and I should say where it goes. So I am free to invest in direct shares, cash, managed funds, even direct property.

    So far, I have only invested in shares and cash, however there may come a day when I wish to invest in other areas. I can easily do that within the one structure.

    I love having the option of investing in shares, especially getting access to franking credits, which are incredible in the SMSF structure. 
     
  2. Tax

    Paying 15% on earnings, and even less for capital gains, is superb. Lower tax allows me to grow my super through compounding my returns. It is surprising how well a portfolio can grow with time, good returns and compounding. The tax rate gets even better in retirement.
     
  3. Permanent Structure

    I love the idea that one tax efficient vehicle can help me to build wealth and provide for retirement. This can be done without opening and closing various accounts and without having to buy and sell investments depending on my retirement status. As long as SMSFs remain a viable option, I can just keep building up my wealth there.
     
  4. Transparency

    I know where the money is invested. I know how much I am paying in fees. I know when a trade is complete. I just need to look up my account balance and my broking balance online. I don’t need to wait for someone to get back to me.

These are some of the basic observations I have made. If you already run your own fund, you may have pet likes and dislikes. If you haven’t set up an SMSF, we always encourage you to take your time and weigh up the pros and cons. It’s your retirement money and it’s a big decision.

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