SMSF wannabee Peter should... Consider costs


Q I am 60 with no debts, own my home valued at $750,000, have an accumulation super balance of $1.6 million with Sunsuper and $100,000 in blue-chip shares. I retired in July 2012 with a payout of $450,000 consisting of long service leave, annual leave and ETP. The net payment, $350,000, is at the moment sitting in a bank earning 4% interest, subject to the highest marginal income tax rate. I will need about $58,000 to live on yearly.

I am thinking of starting an SMSF with the $350,000 and the $100,000 in shares and transferring the $1.6 million accumulation super to a pension (income) account. The combination of both will provide me with the income I need. Does this seem like a good idea?

A Well Peter, with around $2 million worth of investments and no debt, you should comfortably be able to achieve your targeted income in retirement with low levels of risk. The $58,000 you need requires a return of around 3%, plus of course a bit more to cover inflation.

With the amount of money you have invested in superannuation, a self-managed superannuation fund (SMSF) could stack up in terms of cost. However, SMSFs aren’t always the answer, as they often require far more work and responsibility than being part of a managed fund. Depending on what sort of investment option you are looking for, you may be able to shop around and find a provider that offers the investment flexibility you are looking for at a similar cost to an SMSF, without the responsibility of being a trustee.

Something else to keep in mind is that you don’t necessarily need to have all your money tied up in super to have a tax-free retirement. As you are over 60, not only will your superannuation drawings be tax-free, there is currently a tax-free threshold of $18,200 income, slightly more after the low-income tax offset.

Depending on investment earnings, you may be able to have a non-super portfolio of around $300,000 to $400,000 with no tax on the investment earnings. When you turn 65, the senior Australians and pensioner tax offset should kick in, which would give a tax-free threshold of $32,279 for a single. I can’t do your situation justice in these few words. You need professional advice, but make sure you do what works for you in terms of the level of effort and interest you have in investing. It is about you and your needs.


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