With a self-managed superannuation fund viewed by some as a status symbol, an increasing number of Gen Ys (those born from the early 1980s to the early 2000s), are exploring the idea of running their own retirement fund. But is this really a good choice given they will need to lock their money away for decades?

BLOG: Generation Y and Self-Managed Super Funds

Generation Y and Self-Managed Super Funds


With a self-managed superannuation fund viewed by some as a status symbol, an increasing number of Gen Ys (those born from the early 1980s to the early 2000s), are exploring the idea of running their own retirement fund. But is this really a good choice given they will need to lock their money away for decades?

Until recently, SMSFs have been the domain of people with significant super balances who are close to or in retirement. But this is changing, with a marked increase in Gen Ys establishing their own SMSFs. One reason for this is because people are now more engaged with their super, in addition to the set-up and ongoing costs for SMSFs having dropped in real dollar terms as SMSFs have become a more commoditised product. Rule changes that allow borrowing within an SMSF have also opened them up to people with lower super balances.

An SMSF is best suited to an investor who knows where they want to go and the tools they need to get there, and just because you haven’t started to turn grey yet doesn’t mean you cannot successfully manage your own superannuation and financial future. It’s now possible to start an SMSF with a balance of about $100,000 if the member makes ongoing contributions to it. Investors should always consider the tax effectiveness of their investments and super is currently by far the most tax-effective investment, however, whether an SMSF is appropriate comes down to the individual’s financial literacy.

Typically a young person will start his or her own fund to invest in an asset such as an investment property. If they want to manage their own money, but don’t have the means to warrant starting their own fund, one option to consider is joining someone else’s fund. Often children become members of their parent’s SMSF, so the children have the benefit of economies of scale as the costs are paid mostly by the members with the higher balances – that is, mum and dad.

Investors must be aware that managing an SMSF comes with responsibilities, including making investment decisions and arranging for annual financial reports and tax returns to be prepared and audited each year. As a trustee, you are responsible for your SMSF complying with the law at all times.