Superannuation is an organisational pension program created by a company to provide a retirement for their employees. It is similar to the American version of the 401k, letting both the employee and the employer save money for the individual’s pension. However, some companies don’t offer a 401k or superannuation, so you may wish to start running your own. Companies may also offer a superannuation/401k service for retirement but could be extortionate/ineffective when it comes to the fee structure/cost for service, and may not meet the projections you require for the retirement lifestyle you envision.
A lot of 401k plans are quite inadequate and employees/workers end up with loads of additional fees. That’s why many are opting to not take part in their companies 401k and have decided to take matters into their own hands and run their own.
Starting a Solo 401k plan is a good approach, however you need to be registered as self-employed, or run a small business in order to qualify. If you do qualify for one, it can be an excellent option, as you can have higher contribution limits than a traditional 401k.
If you don’t qualify for a Solo 401k, you can choose to go to the route of a Traditional IRA or TIRA. These are personal accounts that you can control yourself, and which can be set up through any online broker. This means no endless form filling, all you have to do is set everything up online and then it can be managed this way too. No more sending forms off in the post, or having to keep paperwork for years to make sure you’ve got everything.
A lot of TIRA’s grow interest and are completely tax free, meaning that you don’t have to worry about losing money while you’re trying to save. A lot of them also don’t require minimum distributions which mean that you can contribute as much or as little as you want, depending on you.
The benefits of having your own superannuation is that you can have greater control over how much you are contributing, and also generally have better control over the amount of interest or the tax that you end up paying on your investments. If you are confused about where to start, many financial advisors will offer advice free of charge to help you better understand that pros and cons of starting and running your own superannuation.
As well as the many benefits to running your own 401k, there are some disadvantages that you should also be aware of. This is why it’s important to check out all of your options before diving in. We have some very good advice on some of the disadvantages of having your own superannuation, so make sure to check that out so you know some of what to expect.
