Question 1: I would like to buy a house in the near future (about three to five years) but would also like to start investing. Should I be focusing more on building towards a 20 per cent deposit to go towards my first home or start investing now?

I’d like to avoid paying extra in fees (such as lender’s mortgage insurance) but I also understand that time in the market is better for the long term. How should I be allocating my money for these two things?

They are both important and common goals, but as you are realising, they are currently conflicting as you cannot do ‘everything first’.

That is what financial planning and goal setting are all about, prioritising your goals, then working out how to achieve them.

Getting into the housing market makes good financial sense and it also provide you other benefits, such as giving you a sense of security, setting you up for a secure future, and setting targeted goals often makes it far more likely that you will stick to it.

And as you have alluded to, if you can achieve a 20 per cent deposit, this will alleviate the need for mortgage insurance and will also result in a lower loan, meaning thousands saved in the long run.

Given your time frame and objective this should be your first goal where you direct most of your savings.

Ideally, if you have the financial capacity, you could set aside a much smaller amount on a regular basis towards long-term investing in the market.

This would start to give you exposure to the market and the benefits of compounding.

However, you should ensure you retain access to the funds at a relatively short notice so you can access them in case of an emergency or redirect the funds to your property goal if you are not achieving it.

Once you are in your property and have your loan under control you can then re-evaluate all your goals, including increasing your long-term investing.

Question 2: My husband and I are in our 50s and 60s, looking to retire this year. We will have a combined super balance of $1.2 million approximately, with my husband having a higher balance. We don’t have joint bank accounts. We’ve been married for 33 years.

Upon retirement I’m wondering how we go about drawing down our super equally as the bills, etc. will be paid ‘Dutch’. We will be mortgage free and probably have only one car. Any advice?

Thanks for your question and the expression ‘will be paid Dutch’ (meaning you will pay for your own expenses).

Your situation is fairly common, i.e. couples retiring at the same or a similar time but with one member of the couple having a much larger balance.

Prior to retiring it’s important to discuss and agree what your income and expenses will look like and who is responsible for what.

In some arrangements there is a primary person responsible for managing the money and paying bills and expenses.

In other arrangements all things, where practicable, are decided together. And in others, as it appears in your case, each pays for their own expenses, and utility bills are split. There are also hybrid variations in these approaches.

It’s worth noting that Centrelink treats all the assets of a couple as if they are jointly owned, regardless of whose name they are actually in. This results in couples who are age-pension age always getting the same age-pension payment.

Now, if one person has a larger financial means, which in most cases means a larger super balance, this has to be factored in.

If you are going ‘Dutch’ then hopefully your husband acknowledges the part you played in maintaining the household etc. and is willing to even up the super balances? This discussion can lead to some disagreements but hopefully after 33 years you know how to come to an agreement.

If you were to even up your super balances, then your husband can simply ‘cash out’ some of his super after he retires and as long as he has reached age 60 the cash out would be tax free.

You could then contribute the funds as an after-tax (non-concessional) contribution of up to $330,000 using the bring-forward provisions (assuming you have not already triggered this and your balance is under $1.48 million).

You could then start separate income streams with your super and have funds paid into your respective bank accounts.

You may wish to seek financial advice over this.

Question 3: Is your super seen as an asset, after your retirement age?

Centrelink does consider your super as an asset, and includes it in the ‘assets’ test in the following circumstances:

• Once you have reached your age pension age, and/or
• If you move your super from accumulation into a pension or income stream.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

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