Most soon-to-be-married couples understand the importance of sharing their financial aspirations, fears, and shortcomings. If they don’t get around to talking money before the wedding, a first house, a new baby and other events early in a marriage tend to force the discussion.
As years turn into decades, however, it’s easy to grow complacent and put big money conversations on the back burner—until, suddenly, couples find that they don’t really know each other, at least financially speaking.
Being financially prepared to retire
“One thing I often see with married couples is a false sense of security,” says Jean Wilczynski, a senior wealth advisor with Exencial Wealth Advisors in Old Lyme, Conn.
Likewise, it’s not uncommon for people who’ve been married for a while to either defer planning to their partners or, on the other end of the spectrum, create retirement planning silos; they manage their accounts separately but without thinking about how their investment decisions complement or contradict that of their significant other.
It’s never easy to raise the issue of money, says Wilczynski, but for couples in the later stages of retirement planning, it’s imperative.
Here are three questions couples should routinely ask to stay out of a retirement planning rut.
What does retirement look like?
The concept of retirement has evolved considerably even within the last decade, making it difficult for some couples to get on the same page about why, when, and how they want to retire.
“Painting a picture of what retirement looks like is even more important today,” says Tammy Butts, an advisor with AXA Equitable Life in Chicago. This is where many couples—even those in long and happy relationships—get tripped up.
“I just met with a couple where she’s a saver, he’s a spender, and every time they talked about budgeting it was an argument,” Butts says, who discovered the source of this disconnect when they started talking about the couple’s retirement goals. “She prioritizes saving because she wants to retire early and travel, but he wants to keep working until he drops.”
Couples may have slightly different aspirations for retirement, and that’s fine—as long as they can recognize these differences and plan around and for them
Where do we stand on risk?
Just as goals and priorities change, so do the emotions and realities of financial planning. For this reason, couples should routinely take each other’s pulse on risk tolerance. “I see couples where one of them likes to drive 30 miles per hour and the other one wants to go 80 miles an hour,” says Butts.
Different ideas about risk aren’t necessarily a bad thing, particularly when couples manage their assets separately. Where it becomes a problem, says Butts, is if couples are oblivious to how their significant others are managing their portfolios. “It’s going to impact the other at some point down the road,” she says. “For a lot of reasons, you want to look at your portfolios holistically.”
How can we play to our strengths?
After couples get on the same page about retirement goals and investment philosophies, they can turn their attention to getting the most out of the benefits and retirement options available to them.
If one spouse’s employer offers a generous match for 401(k) contributions, for example, they might prioritize saving in that account before they fund the other. Similarly, a working spouse can make contributions to an Individual Retirement Account on behalf of a non-working spouse.
“Here’s where you can divide and conquer,” says Kathleen Benjamin, a financial advisor and chief operating officer at BFG Financial Advisors in Timonium, Md. “One spouse might fund the 401(k) and the house expenses, while the other might focus on other savings.”
While couples talk big-picture planning, it’s also important to take care of routine financial housekeeping. That includes keeping each other in the loop on where to find account numbers and passwords; taking stock of insurance policies; and making sure account information is current and accurate—Wilczynski has seen couples who have been married for years and still have parents or siblings listed as beneficiaries.
In matters of the heart and the wallet, the little things do matter. Couples who routinely check in on both the emotional and practical side of planning not only improve their odds for meeting their retirement goals, they may find a more happy union along the way.
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