How to use ETFs for income in SMSFs
Using ETFs for Reliable Income in Your SMSF
For many SMSF trustees, generating a reliable, consistent income stream is the primary focus of their retirement. You need to meet minimum drawdown requirements, pay for your lifestyle, and hopefully, benefit from franking credits to maximize your returns.
While individual stock picking is a common hobby, Exchange Traded Funds (ETFs) are becoming a vital tool for SMSF investors seeking cost-efficient and convenient income.
The Four Pillars of Income ETFs
A robust income portfolio generally rests on four different asset classes:
Equity Income: These ETFs focus on high-dividend-paying ASX companies. Some use strategies to "harvest" dividends or sell options to boost yield. This is the main source of those valuable franking credits.
Hybrids: Sitting between shares and bonds, hybrids (often issued by major Australian banks) offer higher income than fixed interest but with more capital stability than shares.
Fixed Income: Government and corporate bonds provide a defensive buffer. In a world of volatile share markets, the steady monthly or quarterly distributions from a bond ETF can provide significant peace of mind.
Cash ETFs: For immediate spending needs, Cash ETFs offer flexibility and higher rates than many traditional bank accounts, without the "lock-in" periods of term deposits.
Why Simplify?
Running an SMSF in the retirement phase is complex enough with compliance and audit requirements. Using ETFs allows you to build a highly diversified portfolio with just a few transactions. This simplifies your tax reporting and gives you more time to enjoy your retirement.
As your Adelaide financial advisors, we help you assemble these "buckets" of income to ensure that regardless of market volatility, your lifestyle remains undisturbed.
Source: https://www.betashares.com.au/education/etfs-for-income-smsfs/
If you are interested in learning more, give us a call on 08 7477 8252. Our Adelaide based advice team can help you create a long-term portfolio, to generate both growth and income for your future.
General Advice Warning:The information on this website is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making an investment decision in relation to a financial product.