Qualify for Solo 401k Superannuation

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Superannuation is an organisational pension program created by a company to provide a retirement for their employees. It is similar to the American version of the 401k, letting both the employee and the employer save money for the individual’s pension. However, some companies don’t offer a 401k or superannuation, so you may wish to start running your own. Companies may also offer a superannuation/401k service for retirement but could be extortionate/ineffective when it comes to the fee structure/cost for service, and may not meet the projections you require for the retirement lifestyle you envision.

A lot of 401k plans are quite inadequate and employees/workers end up with loads of additional fees. That’s why many are opting to not take part in their companies 401k and have decided to take matters into their own hands and run their own.

Starting a Solo 401k plan is a good approach, however you need to be registered as self-employed, or run a small business in order to qualify. If you do qualify for one, it can be an excellent option, as you can have higher contribution limits than a traditional 401k.

If you don’t qualify for a Solo 401k, you can choose to go to the route of a Traditional IRA or TIRA. These are personal accounts that you can control yourself, and which can be set up through any online broker. This means no endless form filling, all you have to do is set everything up online and then it can be managed this way too. No more sending forms off in the post, or having to keep paperwork for years to make sure you’ve got everything.

A lot of TIRA’s grow interest and are completely tax free, meaning that you don’t have to worry about losing money while you’re trying to save. A lot of them also don’t require minimum distributions which mean that you can contribute as much or as little as you want, depending on you.

The benefits of having your own superannuation is that you can have greater control over how much you are contributing, and also generally have better control over the amount of interest or the tax that you end up paying on your investments. If you are confused about where to start, many financial advisors will offer advice free of charge to help you better understand that pros and cons of starting and running your own superannuation.

As well as the many benefits to running your own 401k, there are some disadvantages that you should also be aware of. This is why it’s important to check out all of your options before diving in. We have some very good advice on some of the disadvantages of having your own superannuation, so make sure to check that out so you know some of what to expect.

Grow your retirement fund

SMSF Disadvantages

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More and more people are now choosing to manage their own superannuation with the aim to have greater control and flexibility of where their super is invested. While many people know the benefits of self-managed super, not many know about the disadvantages, which have left some people confused and even losing a lot of their super. Here we look at the disadvantages of do-it-yourself-super (Self-managed superannuation).

High Cost

Self-managed super funds can be expensive! Costs can range from $500 to $2000 a year. You would need to have a pretty large super balance to start with – more than $200k! This is typically the thing that stops most people from changing to a self-managed super. Don’t consider it if your balance is below $200k. The cost will typically outweigh the return on investment

Little Support

This should be obvious based on the name! Since your in control of your super you typically wouldn’t have the vast amount of resources available that all superannuation funds provide. See popular superfund websites such as Australian Super, MLC and Hesta. They pretty much answer any question related to super you can think of and provide all the forms and services needed to manage you super if you choose to do so.

Administration

When setting up a self-managed super fund, you also need to be aware of the additional tasks YOU need to perform. You need to initially setup a trust deed outlining trustee powers, how benefit payments are handled and an exit strategy if the fund is closed. After that you’ll need to keep very clear records of your super, create annual statements, deal with auditing plus more paperwork. Typically, many self-managed super fund owners utilise the services of accountants that are experts in self-managed super funds, assisting in all aspects of the fund’s administration such as paperwork, reporting and support. If you outsource your administration, ensure your accountant complies with superannuation and tax laws! The ATO has rules and requirements in place. Watch out!

So what do you think now? If your still considering a self-managed superfund you should talk to your accountant. If you don’t have one, find one – Specifically one that also specialises in self-managed super. A growing number of accountants provide this service. You could also speak to a financial planner, however it seems most people are choosing their accountants.