Miranda Brownlee writes an article for the website SMSF Adviser wherein she writes that the analysts are hammering out warnings to the self-managed super funds approaching retirement. The analysts feel that such funds are investing in assets with zero or pretty limited liquidity, hence compromising their minimum pension payments.
Investing in illiquid assets
At the age they are in, SMSF owners must make a thorough risk-benefit analysis. Going for high risk bulky assets with negligible liquidity might not turn out to be a wise decision. To cite an example, property is a great investment and you can do it beautifully with the help of your SMSF but investing in property might not work for you when you are approaching retirement; because while it may be a lot else, property is not a liquid asset.
You can read the original article here.
An example of what can hurt SMSF’s approaching retirement
Let’s take up an example to boot home the point even better. SMSF members can sometimes have a big emotional attachment with the property they have invested in. Not inclined to sell the property, they then have to work out a strategy which aid them to pay their pension with the help of cash flow generated by the property. Often, this cash flow is not sufficient to meet the goal after subtracting the expenses (read property repair). Just as the SMSF members keep ageing, the pension percentage (minimum) keeps going up making the job even more difficult.
SMSF’s must look for right advice
Observing things in this light, I think what’s most crucial is that the SMSF trustees get requisite advice and that, too, from professionals who are good enough to give such advice. Every SMSF must have an appropriate investment strategy suited to it because one-size-fits-all model just does not apply.
The advisers must not only look after solving the riddle of compliance but also give astute advice on management of fund.