A recent article by Robert Warner caught my attention. Mr. Warner is the Managing Director of Cleary Gull, an investment banking firm, and his article was titled, “Are Couples on the Same Financial Page?”. He posited that, to keep happiness and harmony in any marriage, recent or long-standing, communication and shared goals are necessary, especially as they relate to money and finances.
How true that is, and I speak from personal experience. If you want peace and harmony in the marriage, don’t think that one of you alone should be the “keeper of the financial secrets”. If you do, and don’t share that information with your loving partner, dire consequences can follow, including threats of dismemberment, loss of cooking and other important privileges and, most severe of all, loss of control over the TV remote. As I say, I’ve been there, and it isn’t pretty.
In his article, Mr. Warner noted that arguments over money proved to be the leading source of conflict between spouses. It’s a known genetic thing that we men are informed by DNA to need control over the aforementioned TV remote, the driver’s seat in any vehicle we share with our spouse and, of course, the purse strings, even if half (or more) of the income is derived from our wife’s employment.
Fidelity Investments in its 2015 Couples Retirement Study, revealed several telling statistics:
♦ 43% of those surveyed could not correctly identify their partner’s salary, and those who guessed were off by as much as 25%.
♦ 36% disagreed of the amount of the household’s investable assets.
♦ 48% had “no idea” how much they would need in retirement to maintain their current lifestyle, and 47% disagreed about the amount.
♦ 60% of couples overall and 49% of Baby Boomers have no idea how much Social Security they would receive in retirement, even though they have access to that information on www.ssa.gov.
♦ 1 in every 3 couples had extreme differences on what they thought their expected lifestyle would be in retirement.
I wouldn’t have believed these statistics myself if my own spouse hadn’t threatened to take a meat cleaver to me if we didn’t sit down and have “the talk” (no, not the one about sex or even what to do about aging parents; I’m talking the “financial talk”). Also, I’m kidding about the meat cleaver, though I admit I never turn my back on my wife now when we’re in the kitchen together. (Again, just kidding. Really.)
Thankfully (especially for us Neanderthals), Robert Warner proposed a strategy that helpfully leads us back to the glory days of marriage. You remember them, I’m sure. Newly married, no cares, no one else existing in our own sweet universe, no kids?
Here’s some of what he suggests:
♥ Start the conversation. Begin slowly and move from the Big Picture and move toward the details. Each spouse should “define their dreams, discuss priorities and set the table”. Some advisors go so far as to suggest writing down a combined “mission statement” but that reminds me too much of basic training and I don’t ever want to go back there.
♥ Ask questions to identify differences or concerns. Once the basic “dream plan” is considered, each spouse should critically examine it in light of their habits (some save while other spend, and even where both save, they may do so differently and for different reasons). Questioning the dream plan often reveals areas of worry that one or the other spouse may not have thought of, and this back and forth can help identify how the plan can be adjusted.
♥ Determine your respective risk tolerances. Fidelity learned, in its 2013 Couples Retirement Study (Fidelity does these studies every two years, always in an odd year – probably so that frenetic – and this time, crazy – national elections won’t unduly skew the results), and found that when asked whether they would be willing to invest a significant amount of money to achieve higher returns if they could lose some or all of their initial investment, only 4% of women would take that risk, whereas 15% of men would do so. Just goes to show, men can be more stupid than women, but I’m keeping THAT thought to myself!
♥ Identify important goals and priorities. Establishing mutual goals makes planning smoother, especially where economic downturns require adjustments to the dream plan. Determine what each spouse expects from a retirement lifestyle, whether they anticipate staying in the same home or “downsizing” at a specific point in the future, whether they plan on assisting kids or grandkids with their education, how philanthropic they intend to be, and so on. Guys may have to pare down their Bucket List by eliminating such things as getting a seat on the next Shuttle to the Moon, skydiving, and riding that bucking bronco, and instead add a trip to a warm place in Winter and, though dreaded by most of us, joining a health club and obtaining a Museum membership.
♥ Two portfolios but one couple. IRA and other retirement accounts owned by each spouse won’t be merged (at least until death of the first spouse) but planning how to utilize the benefits of those retirement accounts for the couple’s dream plan should be considered. Also, even though each spouse may have separate accounts for their “mad money”, ultimately financial simplification by consolidating accounts where possible will make it easier if one spouse becomes disabled, especially cognitively.
♥ Test the plan. Once developed, consider what would happen to your plan in worst-case scenarios, such as serious illness, unexpected medical or household bills, death of a spouse, or a move out of home because of a need for long-term care. Ahem, just an aside – most elder law attorneys can help you understand how these events will affect your dream plan, as well as provide you with advice on how to deal with them. Just sayin’.
♥ Plan the estate. Whether you devise your dream plan yourselves, or do so with professional advice from financial advisors, elder law attorneys or other life care planners, make sure you create or modify your estate planning documents to fit your plan. Whether it’s a simple Will, revocable living trust, or more sophisticated irrevocable trust planning, don’t let your dream plan shatter because you failed to properly consider how your wealth – and everyone has wealth, not just to proverbial “1%” – will be utilized, both to fund your dream plan during your life, and to distribute it after your death.
♥ Keep each other informed. The Big Talk on Finances doesn’t stop after your dream plan is created. Even if the couple agree on one person to “handle the paperwork”, the couple should meet at least quarterly to have a “plan review”. The review should not only be about the couple’s financial status at a particular point in time, but whether anything has changed significantly enough to warrant adjustment of the plan. Whoever “handles the paperwork” should make sure the other has access to account information, including passwords and how and where to access financial information. If the information handler dies first, make sure the other has the tools he or she needs to carry on seamlessly (or, believe me, she’ll find a way to get to you with that meat cleaver).
So there you have it. To maintain that marital bliss (or re-establish it if you lost it along the way), be sure to have the Big Talk on Finances and keep the conversation going. Once you formulate your dream plan, or at least get the conversation started, don’t hesitate to contact your local, friendly elder law attorney to create the document framework that will guide your plan along the journey of life. We’re ready to work with you!