One of the clear benefits of taking a joint approach to family finances is that both spouses will gain a better understanding of how family money is managed and place themselves in a stronger position to reach their long-term goals. As a result, couples who take a co-ordinated approach are generally more confident about their financial future.
Yet a recently-published report by a Bloomberg’s news service in the US points to several comprehensive surveys reinforcing once again that many couples don’t seem to know anything about their partners’ retirement savings and how much their partner earns.
Particularly given the waves of Australian baby boomers already in retirement or nearing retirement – and their children reaching middle-age or beyond – the issue of joint personal financial management is well worth examining and possibly discussing with an adviser who can help facilitate the discussion in a “neutral” environment
The list of financial matters, including the state of their retirement savings, which couples might discuss with their spouses themselves (and with their advisers) seems almost endless.
Here are a few starters: Budgeting together; setting long-term shared goals; co-ordinating investment, savings and debt repayment strategies to reach those goals; and setting appropriate asset allocations and diversification for portfolios held jointly and by individual spouses.
Other topics worth discussing as a couple include how to minimise investment costs including investment management fees and taxation – again for portfolios held jointly and by individual spouses (as well as through any entities). The possibly different personal tax rates of individual spouses may be a consideration here regarding how to hold investments.
The Government’s plan to place a $1.6 million cap from July 2017 on the amount that can be transferred into super pension accounts or that can remain in pension accounts will encourage more couples to co-ordinate super savings. Undoubtedly, couples with larger super savings will consider whether to make their super balances as even as possible.
And the annual caps on individual concessional and non-concessional super contributions also provide a powerful incentive for couples to co-ordinate their retirement-savings efforts. (Members with super balances above $1.6 million will not be able to make more non-concessional contributions from July next year under the draft legislation.
Another standard topic for discussions about joint finances and investments should be whether the family holds sufficient life, disability, income-protection and health insurance for a family’s needs.
One of the clear benefits of taking a joint approach to family finances is that both spouses will gain a better understanding of how family money is managed which can result in less family stress and anxiety around money matters
Most of us would know of instances where one partner in a couple tends to dominate the family’s financial decisions. Often this is partly because the less-involved partner shows little interest.
Indeed, the tax office – as regulator of self-managed super – has warned of the possible consequences for an SMSF’s efficient management and compliance if the spouse who is more involved with the SMSF predeceases the less-involved spouse. This warning, of course, could extend to non-SMSF family finances.
Managing personal finances and investments as a couple should, ideally, go far beyond having a joint bank account. Both spouses should at least be pulling in the same direction when it comes to their finances. In our experience, couples who do this (perhaps with the assistance of an experienced adviser) are generally less anxious and more confident about their financial future.
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