The approach of a new financial year is often a super crunch time. It's a time when many investors decide whether to stay with their large super fund, switch to another big fund or setup a self-managed fund.
There are, of course, common triggers for investors to review their super arrangements in the countdown to another financial year. These include a planned change of jobs from July, a new (financial) year resolution to pay more attention to their super, an end-of-year retirement-savings checkup or imminent retirement.
The first few months of a new financial year are among the most popular times to setup a self-managed super fund. For instance, 8,395 SMSFs were established in the June quarter last year – the highest quarterly figure over the 12 months to December.
Investors often aim to establish their SMSF in July to spread their costs as much as possible over a whole year.
In many cases, investors time the setting-up of their SMSFs with their retirement at the end of a financial year or relatively early in a new financial year. Some imminent retirees decide they have the time and interest to run an SMSF in retirement. Yet others would regard looking after an SMSF – even with professional guidance and administration – as something they don't want to bother about in retirement.
Incidentally, the June quarter of any year is usually when many SMSFs are wound-up. For example, more than 6,500 SMSFs were closed in that quarter of 2017, underlining that this is often a super crunch time.
A reality for the million-plus members of existing SMSFs is that the vast majority of their funds are likely to be eventually wound-up. Reasons why fund trustees close an SMSF include the death/serious illness of its most active member or asset values eventually becoming too small for the fund to remain financially viable.
Is this now a super crunch time for you? If so, there's plenty to think about – whether you stay with a large APRA-regulated fund, setup an SMSF or close an SMSF.
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