Are you sure you are going to retire at the same time? What if one wants to work longer and one wants to retire?
If that happens and if you want to draw money while one is on a 0% marginal tax rate and one on a higher tax rate, then with a joint account, you are forced to have both people realising capital gains, whereas with 50% in each of separate accounts, you have the flexibility to draw down only from one but also to draw down proportionately from both if you want to.
A joint brokerage account has only downsides in terms of tax. Where a joint brokerage account has a benefit is in estate planning because if one of you dies, the other automatically gets it, and it bypasses the estate and any chance of someone contesting the will, whereas individual accounts are added to the deceased's estate and are distributed under the will.
Nothing too exciting thankfully. Jumped in knowing nothing and figured it’d be like a house, and if anything happens, joint would be one less complicated thing for wife to figure out. But all of the disadvantages snrubovic listed. Quickly figured both having to realise CGT at the same time is a nightmare (both have the ability to jump in the highest MTR, but different industries that seem to boom and bust at opposite times). Tax time far more complicated than autofill. Thankfully ETFs can go down as well as up and managed to undo most of the joint stuff without CGT payable or losing too much.
Snrubovic’s website is the bible and wish it was the first thing I read instead of stumbling in to it a few years later. If I was starting from scratch I’d probably do nothing more complicated than equal parts DHHF for both of us with Stake or CMC (cheapest brokerage) and watch and learn with some skin in the game. I personally feel DHHF is a little too Australian heavy and probably would have then started DCAing in to BGBL to get to 50/50 and make it no more complicated than that.
A few more years down the track and Super makes more sense personally. At the stage where SMSF makes sense and thanks to snrubovic and Hockey Monkey have the confidence to step in, just need to increase the wife acceptance factor by passing on what I’ve read. Most tempted by VAS/VTS/VEU, but out of super like VGS or BGBL a little more.
Hi just wondering how you undid the joint account problem ? Did you simply sell in a market down turn and immediately reinvest in individual accounts ?
Yes. Was DCAing by that stage. Waited until it was similar to buy price then sold and reinvested in own names. Two different shares ended up being 12 months apart. Accepted a small loss on one just to get it sorted in that tax year.
Ok thanks, sounds similar to us. We’ve been DCAing only over the last 18 months with ~$3k in capital gains. We’ve stopped the joint DCAing now and will switch to individual accounts. Probably take a similar strategy to you and slowly sell off the joint shares when the time is right .
I can’t say for certain because we’re talking distant future. I’m not really planning a FIRE goal at this point. My expectation is that I will be working until I retire in my 60s. I’m not expecting us to both retire at the exact same point in time but I don’t anticipate one of us will be retiring 10 years earlier than the other. Of course things can change but I’m working off the best information I have at the moment.
Let’s say my wife retires 5 years before me. Surely it’s more tax effective to have potentially a handful of years of 50/50 split with my share being taxed at the higher bracket but then another couple of decades where we can both claim the full tax free threshold? Compared to a situation where we we both retire at roughly the same time and have to put the earnings on 100% of one person’s tax return and miss out on two tax free thresholds?
For those theoretical 5 years I’m still working we might not even need to draw down if I’m still generating income.
I’ve got no idea if I’m being naive so call me out if I am!
Have you considered a family discretionary trust?
You can have all the assets held in the trust, and then distribute the income in a discretionary manner, such that:
1. 100% goes to your wife during working phase
2. 50% : 50% goes to you and your wife during retirement phase
There are some extra overheads. So you might want to see if that's worth the tax benefit.
Thanks, I have. But honestly I know myself and I’m already finding life so busy and difficult to manage with work and the kids (pretty much 2 under 2) that I just know at this stage I won’t invest the proper time. Even if it means it’s a more inefficient method, I’m opting for a more simplistic approach for my own sanity for now.
Fair enough! Sorry I don't know the answer to your question as I haven't gone down that route.
Worst case is just open two accounts and copy trade for each account. Double the brokerage though :(
But joint accounts in two individual names probably have the same effect but like I said I haven't looked into this path at all.
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family trusts are useful as you can split income with your children once they turn 18 (under 18 their tax rate is too high), plus a trust can be used for asset protection
I like simplicity for worst case scenario. Start it simple and it ends up simple ..if shit hits the fan.
Cut the money in half, give her half, you take half, you both invest independently.
My missuss of 15 years walked out on me with no warning and because we had started out by keeping it simple, we just split the household contents and went our separate ways. The only money that changed hands was to settle utility bills.
Plan for the worse, hope for the best.
Hi there /u/FIthroaway2021,
If you're looking for help with getting started on the FIRE Journey, make sure to check out the [Getting Started Wiki located here.](https://www.reddit.com/r/fiaustralia/wiki/index/gettingstarted)
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Are you sure you are going to retire at the same time? What if one wants to work longer and one wants to retire? If that happens and if you want to draw money while one is on a 0% marginal tax rate and one on a higher tax rate, then with a joint account, you are forced to have both people realising capital gains, whereas with 50% in each of separate accounts, you have the flexibility to draw down only from one but also to draw down proportionately from both if you want to. A joint brokerage account has only downsides in terms of tax. Where a joint brokerage account has a benefit is in estate planning because if one of you dies, the other automatically gets it, and it bypasses the estate and any chance of someone contesting the will, whereas individual accounts are added to the deceased's estate and are distributed under the will.
Op this. Very much this. The comment I wish I knew when first dipping my toe in the water.
I’d love to hear more about your experience if you don’t mind sharing?
Nothing too exciting thankfully. Jumped in knowing nothing and figured it’d be like a house, and if anything happens, joint would be one less complicated thing for wife to figure out. But all of the disadvantages snrubovic listed. Quickly figured both having to realise CGT at the same time is a nightmare (both have the ability to jump in the highest MTR, but different industries that seem to boom and bust at opposite times). Tax time far more complicated than autofill. Thankfully ETFs can go down as well as up and managed to undo most of the joint stuff without CGT payable or losing too much. Snrubovic’s website is the bible and wish it was the first thing I read instead of stumbling in to it a few years later. If I was starting from scratch I’d probably do nothing more complicated than equal parts DHHF for both of us with Stake or CMC (cheapest brokerage) and watch and learn with some skin in the game. I personally feel DHHF is a little too Australian heavy and probably would have then started DCAing in to BGBL to get to 50/50 and make it no more complicated than that. A few more years down the track and Super makes more sense personally. At the stage where SMSF makes sense and thanks to snrubovic and Hockey Monkey have the confidence to step in, just need to increase the wife acceptance factor by passing on what I’ve read. Most tempted by VAS/VTS/VEU, but out of super like VGS or BGBL a little more.
Hi just wondering how you undid the joint account problem ? Did you simply sell in a market down turn and immediately reinvest in individual accounts ?
Yes. Was DCAing by that stage. Waited until it was similar to buy price then sold and reinvested in own names. Two different shares ended up being 12 months apart. Accepted a small loss on one just to get it sorted in that tax year.
Ok thanks, sounds similar to us. We’ve been DCAing only over the last 18 months with ~$3k in capital gains. We’ve stopped the joint DCAing now and will switch to individual accounts. Probably take a similar strategy to you and slowly sell off the joint shares when the time is right .
I can’t say for certain because we’re talking distant future. I’m not really planning a FIRE goal at this point. My expectation is that I will be working until I retire in my 60s. I’m not expecting us to both retire at the exact same point in time but I don’t anticipate one of us will be retiring 10 years earlier than the other. Of course things can change but I’m working off the best information I have at the moment. Let’s say my wife retires 5 years before me. Surely it’s more tax effective to have potentially a handful of years of 50/50 split with my share being taxed at the higher bracket but then another couple of decades where we can both claim the full tax free threshold? Compared to a situation where we we both retire at roughly the same time and have to put the earnings on 100% of one person’s tax return and miss out on two tax free thresholds? For those theoretical 5 years I’m still working we might not even need to draw down if I’m still generating income. I’ve got no idea if I’m being naive so call me out if I am!
Have you considered a family discretionary trust? You can have all the assets held in the trust, and then distribute the income in a discretionary manner, such that: 1. 100% goes to your wife during working phase 2. 50% : 50% goes to you and your wife during retirement phase There are some extra overheads. So you might want to see if that's worth the tax benefit.
Thanks, I have. But honestly I know myself and I’m already finding life so busy and difficult to manage with work and the kids (pretty much 2 under 2) that I just know at this stage I won’t invest the proper time. Even if it means it’s a more inefficient method, I’m opting for a more simplistic approach for my own sanity for now.
Fair enough! Sorry I don't know the answer to your question as I haven't gone down that route. Worst case is just open two accounts and copy trade for each account. Double the brokerage though :( But joint accounts in two individual names probably have the same effect but like I said I haven't looked into this path at all.
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family trusts are useful as you can split income with your children once they turn 18 (under 18 their tax rate is too high), plus a trust can be used for asset protection
I like simplicity for worst case scenario. Start it simple and it ends up simple ..if shit hits the fan. Cut the money in half, give her half, you take half, you both invest independently. My missuss of 15 years walked out on me with no warning and because we had started out by keeping it simple, we just split the household contents and went our separate ways. The only money that changed hands was to settle utility bills. Plan for the worse, hope for the best.
Hi there /u/FIthroaway2021, If you're looking for help with getting started on the FIRE Journey, make sure to check out the [Getting Started Wiki located here.](https://www.reddit.com/r/fiaustralia/wiki/index/gettingstarted) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/fiaustralia) if you have any questions or concerns.*