THE WEALTH BUILDER: I’m 40 and thinking of making a massive change to my super. Is it the right move?
Daily Mail Australia’s new columnist – James Wrigley, chief financial advisor at First Financial, answers readers’ money questions every Wednesday.
Hello James,
I have a question about my pension. At age 40, I am considering switching my super fund to a self-managed super fund (SMSF) and investing 50-100 percent of my portfolio in Bitcoin. While I am aware of Bitcoin’s volatility, I am confident in its long-term growth potential as part of my retirement strategy.
I would greatly appreciate your thoughts on the possible transition to an SMSF, as well as your thoughts on whether I should invest fully in Bitcoin or diversify to 50 percent.
In addition, if you have any recommendations for an SMSF advisor or accountant who specializes in this area, I would be happy to get in touch with them for further discussion.
Thank you for your time and insight.
Kind regards,
All.
Hello Allen,
An SMSF is a big step. My preference is to look at it from the angle of why you shouldn’t have one. I’ve seen far too many people think setting up an SMSF is a good idea, only to set one up, move their super across, buy a few shares, not know what to do next and then just leave their super alone. cash – do that for too long and it’s a recipe for disaster.
Without appropriate advice and some idea about investing, the vast majority of people would be better off with one of the big super funds. At forty (me too) you’ve had a great working life all your life. If you have a reasonable income and only an average return from a retirement fund, chances are you’ll leave your job with enough superiority to be well on your way to a comfortable retirement. Pension should not be used to speculate large portions of your money on individual assets.
I can’t comment on Bitcoin, I don’t have a license for it. But I do know that some Bitcoin ETFs have been launched. Perhaps you can use a regular super fund that allows you to buy a Bitcoin ETF without having to set up the SMSF.
An SMSF is like a trust, with its own unique set of rules (known as the trust deed) and must comply with pensions legislation.
When you set up an SMSF you become responsible for running the SMSF (known as the trustee) and complying with a whole range of laws. You also lose access to a range of protections put in place to help protect you and your retirement savings that exist in a regular pension fund.
If you do not meet all legal requirements for operating an SMSF, you could personally be subject to large fines, lose half of the balance of your SMSF in taxes and face imprisonment. It’s a big problem. Far too many people set up SMSFs when they shouldn’t.
All that said, I’m a big fan of an SMSF, but only for the right person.
You’ve undoubtedly heard the phrase “don’t put all your eggs in one basket.” I would never recommend anyone put 100 percent (or 50 percent for that matter) of their retirement into that one asset.
You make comments about diversification, but even keeping 50 percent of your pension in one investment is not diversified. It’s highly likely, wherever your pension is now, that balance is invested in a hundred or more different assets – that’s diversification. It won’t make you rich overnight, but it’s also unlikely you’ll lose everything overnight.
All the best.
James.
Send your questions to James thewealthbuilder@dailymail.com.au
James Wrigley is a representative of First Financial PTY LTD ABN 15 167 177 817 AFSL 481098
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