How to talk about retirement savings with your spouse


When the market becomes unstable, it becomes difficult to make a decision on your own. Adding another person to the mix can ignite if the couple disagrees about how much of their portfolio to invest in stocks.

Ask your parents. My mom was happy to have a high percentage of long-term savings, but my dad wasn’t. So when the share price fell in 2008 in the early 1970s, he wanted to pull out of the market and she wanted to buy more shares.

Tensions over asset allocation, or the desired percentage for stock ownership, often increase when one or both members of the couple retire.

“When you retire, you go from working income to portfolio spending,” said Julie Birta, senior investment manager at Vanguard Group Personal Advisor Services, which could exacerbate concerns about a downturn in the stock market. say.

A significant proportion of older people have very different investment approaches. Many Vanguard retail clients aged 65 to 74 oversee their investments, with 16% holding more than 98% of their portfolio in stocks and 12% holding no stocks at all. .. This percentage is fairly stable at older ages. ..

Almost a third of couples’ clients have “visible differences in risk tolerance,” said Ron Guy, a consultant for Sunnyvale, Calif. Jake Northlap, a counselor in Bristol, Rhode Island, estimates that for couples working together, it could be as high as 70%.

“This is often associated with their unique experience of spending money throughout their lifetimes,” says North Wrap.

If couples have different risk tolerances, there is no easy fix for joint financial decisions. However, Matt Elliott, a counselor from Rochester, Minnesota, must determine the preferred approach for both partners to “long term success in the portfolio and marriage.”

Here are some strategies to consider when considering coordinating different approaches for the same couple:

Talk about it

A good way to understand a person’s risk tolerance is to examine their behavior during past recessions, says financial advisor William Bernstein.

“The question is, how did you feel during the financial crisis of last March or the financial crisis of 2008 and 2009 when stocks plunged,” he says. Those who escape the market should have an “inventory of no more than 50%,” Bernstein said.

According to Bernstein, it may also be beneficial to consult an advisor to stop selling when the stock price falls. This corrects for losses and often causes investors to miss rebounds.

The conversation may not result in consensus, but it can give each spouse more understanding and patience for the other’s opinions, the counselor says.

Risk tolerance may be related to the experience of wealth in childhood, or the lack of it, says the advisor.

Bernstein asks his client, “How sick would it be if my parents put me on the market for $ 10 and lost money along the way when I was nine?”

Consider the risk you can take

You might want to make a big investment in stocks. But that doesn’t mean you and your spouse can afford to do it, says Chicago councilor Sheila Paden.

Couples who save more than they think they need in retirement can usually afford to invest a higher percentage of their assets in stocks than couples who are in short supply and are on the verge of retirement. (Advisors often recommend saving at least 25 times the amount you need to withdraw from your portfolio each year when you retire.)

Retirees should not “bet on something they cannot afford to lose”. Says Anthony Watson, a counselor based in Dearborn, Michigan.

Meet in the middle

Some recommend adopting the preferred asset allocation of a conservative spouse.

However, David Blanchett, head of retirement research at Morningstar Co., Ltd.

Said it’s a recipe for more aggressive spouse frustration. In the worst case scenario, he or she could increase a couple’s participation by the time the market peaks.

Blanchett admits that neither spouse can feel satisfied with the middle-of-the-road approach. But he says compromise may be the best way to help resist the temptation to deviate from the agreed plan by increasing and decreasing stock allocations.

Plus, he says, there are ways to craft a comprehensive plan to make everyone feel good.

Conservative spouses may be less concerned about stocks if their financial plan includes a cash reserve that covers basic costs for years after retirement.

With cash on hand, he or she may be willing to take on more risk in the rest of the portfolio. It will “make the other spouses happier,” Virta says.

Focus on the Goals

Yet another approach is to divide the portfolio into tranches assigned to specific purposes, such as mortgages and retirement payments.

Los Angeles counselor Stephanie Bacco says the method encourages couples to “match their goals” rather than “be aware of the risk.”

The more money a couple needs for things like vacations and school fees, the more conservatively it should be invested, Bucko says.

Share your thoughts

How would you talk to your spouse about retirement savings? Join the conversation below.

Things can get complicated if a couple doesn’t save enough.

Bucko says the couple who worked together wanted to fund their child’s college education and retire early, but couldn’t afford both. They decided that debt-free education was “essential,” but that early retirement “should,” she said.

Hence, they invested college money prudently and took more risk in retirement investments. She says they will work longer if the stock bets are “not rewarded”.

Pay attention to your own wallet

That’s more or less what my parents did.

Since each had a similarly sized personal retirement account, their combined asset allocation fell in the middle of their liking. But even though they only wielded it over part of their pie, each had a greater sense of control.

Bernstein says the logistical complexity makes this approach a last resort.

For some couples, it can be difficult to split the wallet. Even if your spouse starts with a similar balance, your investment may be more appreciated. And this has a greater influence on the combined asset allocation to that person.

Managing taxes is another challenge. The bonds should ideally be held in a 401 (k) and IRA, where interest payments can be reinvested tax-free until the money is withdrawn. However, if the more aggressive spouse has the IRA and the more conservative spouse has a taxable intermediary account, the bond will ultimately be placed in the taxable account and will receive interest. Taxes can be paid at.

Write to Anne Tergesen ([email protected])

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