25 May Happy Spouse, makes a Happy House
It is generally a simple decision to combine your super balance with your partner’s. However, it is crucial that you have a conversation about the type of investments you would each like to make – be it property, shares, managed fund, bonds or term deposits. How much is invested into each of these will be dictated by your risk levels.
Different Risk Comfort Levels
Communication is vital – together you need to consider how much is spent in different types of investments and your appetite for risk.
Everyone has a different view on the risk that they are willing to take when investing their savings. This is dictated by their personality and past experience with money. Some people are naturally risk adverse, preferring ‘certainty’, over something with an elevated risk but the chance of a better return. The basic rule of investing is that the lower the risk, the lower the return, and vice versa.
While you might enjoy the thought of getting a high return that outperforms the market by putting your funds into a high growth portfolio, your spouse might be more comfortable to keep all their cash under the mattress if they could!
How Will You Invest?
Once you have discussed your risk profiles you then need to discuss how much will be invested in the different types assets. A good way to approach this is to decide on the breakdown between growth versus defensive assets – and the specific types of investments that make up these. For example how much of your portfolio are you both happy to have in shares?
You also need to tell your spouse if you have definite ‘must haves’ or ‘off limits’ investments – for example you may only wish to invest in socially responsible companies so Tobacco companies would be off limits. It is a good idea to discuss everything and not leave things assumed, as this could undermine not only your superannuation but your relationship.
Who Will Make the Investment Decisions?
Discussing how investment decisions will be reached is important. Simply delegating this responsibility to the partner with more expertise or experience can lead to future problems. The partner with less knowledge may want to be involved in making the decisions and will need some help from your adviser to increase their knowledge of super and investments.
On the other hand it should not be assumed that the partner with more knowledge will make the decisions as they may not want the burden of having full responsibility for the investment outcomes which could cause strain if the results aren’t as predicted.
Please contact your SMSF adviser if you would like to discuss any of the above in further detail.