Not long ago, over a Christmas lunch — with the sort of friend that knows where the bodies are buried — I realised I might have the wrong type of Christmas spirit.
She and her beau made a last minute decision to head to Bali for the Chrissy holidays. A decision made that morning. I guess that’s one of the perks when you work for an airline.
My old pal asked me my plans.
I somehow forgot to mention the horde lobbing up to my place looking for food, booze and festive cheer.
I didn’t even mention how excited I am that my almost-four–year-old can’t wait to see what treasurers Santa has left her.
Instead, I told her about my after Christmas plans. You see, I have a full list of items that I’m sure will make my life easier. The glossy brochure says so.
‘I’m not following,’ was her reply.
I explained my plan.
I’ve set aside a whole day for Ikea. I’ll fit in as many shopping hours as legally possible. Partly because the place is a maze designed to suck you in and empty your wallet. The other part is because I have two little kids at home and I’m happy to avoid responsibility for a day.
Once I return with my life sorting goodies, the next day will be spent attacking the home office.
‘Right,’ said my pal. ‘That’s not exactly a riveting Christmas now is it?’
Don’t get me wrong, I was looking forward to Christmas. It’s just I was a little more excited about tackling my study.
Because it’s a mess.
You see, there’s paperwork everywhere. Receipts, bills and random paper needing a new home. A filing cabinet that won’t close because it’s full. Pens in the pen drawer that don’t have ink. Loose staples next to out of shape paper clips.
There’s never any blank paper for printing because kid number one likes to tear it up and turn it into ‘snow magic’, like Queen Elsa from Frozen. The texters have no lids. That doesn’t matter anyway, because number two kid likes to bite the tops off the texters before showcasing his artwork on the walls.
Then add in two people who work from home during the week, a small business on the side, managing your own investments and a self-managed super fund…and it’s chaos.
My study looks like a bunch of teenagers threw a party, invited all of their Facebook friends, and then didn’t bother to hide the evidence.
I’d love to say I’m teasing. That it’s not really that bad.
A couple of years ago it wasn’t.
In fact, it all changed this year.
Towards the end of 2013, I started a self-managed super fund.
Since then, the amount of paperwork in my study has become massive. Stupidly enormous. If you care about the environment and paper wastage…think twice about setting up an SMSF. You can practically hear the trees crying in protest from your in-tray.
The truth is, the amount of paperwork involved with an SMSF caught me off guard. And I’m an organised person. I mean, I have a folder for takeout menus. I still have the operator’s manual for a fridge bought seven years ago!
For the record, it’s in the filling cabinet under ‘Manuals’, and then in a folder called ‘Appliances’ and then a sub folder called ‘White Goods’. No, I’m not joking.
See? I’m stupidly — to the point of needing medication — on top of paper work.
Yet the SMSF stuff just kept rolling in, and I haven’t kept on top of it.
Clearly, I’m not alone. The Australian Taxation Office compiled a bunch of data that says more people are closing their SMSF accounts each year.
In the June 2012 financial year, 7119 closed their fund. In the June 2013 financial year, 7653 SMSF funds were shut. And the ATO reckon that number will be higher again for the 2014 financial year.
There are various reasons for the funds being closed. The most obvious one is death. Which means the fund is distributed to the nominees before being wound up. Also, many people have been taking a lump sum at retirement and closing the fund after draining it.
Then there are those that might not be kicking the sort of financial goals they thought they would. So they close it down because they fear more will be lost if it keeps going.
Finally, there’s the ridiculous amount of paperwork involved.
Joshua Stega, Director of JAS Wealth, a financial advisory firm, said most of his clients were closing their super account down because the paperwork simply becomes too much.
The massive amount of paperwork can feel like you’re doing something wrong. Those papers pilling up can be intimidating. With so many pages requiring your attention, it’s easy to be overwhelmed. And with each new page that comes your way, you start to worry that you’re stuffing it up.
It doesn’t help that there are the threats of fines. The government say they’ll charge you $10,000 if you don’t keep on top of your paperwork, or if you do something wrong.
On the surface it’s easier to give your money back to the super industry than risk the government breathing down your neck.
So of course many people will throw their hands up in the air and walk away.
But having said all that, you shouldn’t let the threats of fines and the enormous amount of paperwork put you off.
This is a small price to pay for control of your financial future. Don’t let the over-regulated self-managed super industry stop you from deciding how your twilight years play out.
‘Being able to personalise the fund’s assets to suit your investment and retirement objectives is a huge reason SMSFs are gaining popularity over public offer funds.
‘Flexibility in investment selection enables trustees to act on the control they have.
‘And finally, costs.
‘The benchmark for setting up an SMSF used to be $300,000. Not so these days.
‘The lowest cost provider will establish an SMSF at NIL cost and administer the fund for $39 per month ($468 per annum). Note that there are conditions attached concerning which online bank and broker you can use.
‘Technology and competition are driving down the costs in the SMSF market. Members (single or combined with a partner) who have more than $60,000 can seriously investigate the pros and cons of an SMSF.’
I may not have the right sort of festive spirit, but I won’t let the government’s efforts to bury me in paperwork scare me off.
For The Daily Reckoning