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Retirement Plans Stymied When Couples Disagree
Encourage spouses to discuss their retirement goals together

By Stephen Miller, CEBS  2/7/2014
 

Working couples, if they discuss the matter at all, are likely to disagree on the lifestyle they expect to lead in retirement, how much savings they'll need to secure their retirement years, and how much risk they should take to grow their nest egg, according to Fidelity Investments’ fourth Couples Retirement Study, released in time for Valentine's Day 2014.

Retirement plan sponsors that encourage workers to save enough for a secure retirement through their 401(k) or similar workplace plan should consider directing educational efforts at both spouses, encouraging them to discuss their retirement goals and how to prepare to reach them.

The study was fielded in May 2013. Respondents were at least 25 years old, married or in a long-term committed relationship and living with their respective partner.

Among working couples, 38 percent who aren’t retired disagreed about the lifestyle awaiting them when they stop working, with 22 percent of men expecting a “very” comfortable retirement compared with only 18 percent of women. Furthermore, their strategies to reach their retirement goals diverge: Women prefer to preserve wealth even if it means giving up higher returns.

The findings also revealed couples frequently:

  • Disagree on the role working will play in retirement (32 percent of repsondents).

  • Haven’t put a plan in place to manage rising health care costs in retirement or didn’t know they should do so (38 percent).

“The fact that many couples disagree about money isn’t surprising, but the realization so many don’t actually resolve their financial squabbles is cause for concern, “ said Lauren Brouhard, senior vice president of retirement at Fidelity. “Even the closest of couples have opportunities to get more on the same page" by making financial planning a regular part of their conversations.

Even if couples rarely fight about money, that doesn’t mean they are in sync when it comes to financial priorities. The study showed more than one-third do not both know where important household financial and legal papers are kept, and approximately one-third disagree about who the primary beneficiary is on their life insurance policies and retirement accounts.

Four Essential Questions

To get the conversation started, couples are advised to ask—and reach agreement on—the following financial “essentials”:

Are you truly equal partners when it comes to handling the finances? This isn’t the case for everyone. However, even if one person has assumed the role of family financial planner, it’s important both are prepared to take over as the “family CFO” if necessary. A bit of contingency planning now can help avoid a larger problem down the road.

Do you both have a handle on retirement, insurance and other accounts? Make sure both spouses know who the beneficiaries are on their workplace retirement plans, life insurance policies and savings or  brokerage accounts, because there are legal implications if beneficiaries are not assigned. Discuss what retirement, savings and insurance is in place, and where important documents are located. This can help avoid family squabbles and unnecessary tax penalties in the years ahead—and ensure greater peace of mind.

Are you jointly maximizing your savings potential? There’s power to having two become one, so make sure each spouse, if eligible, is contributing to tax-advantaged retirement savings plan. Establishing and maintaining an age-appropriate asset allocation that adjusts over time can be critical to savings success.

Do you have a shared vision for what your retirement might look like? Many couples don’t. Issues to weigh include whether they are looking to travel the globe or simply tend the garden at home. If they're not on the same page about goals, it’s hard to put the right savings strategy in place. Fidelity's online Couples Quiz is intended to help couples learn more about their financial personalities.

The 'Three C's' of Family Financial Planning

To make sure both partners are equally comfortable behind the financial wheel, Fidelity advises practicing these "three C’s":

  • Communicate. Make it a point to set aside time to have meaningful conversations and identify shared financial goals. If extra help or guidance is required, a financial professional can often help sort through the important points to consider and can help facilitate agreement.

  • Collaborate on a plan. Building a financial plan together gives partners an equal opportunity to understand their financial needs and how to get there. Planning allows couples greater control over how they can reach shared financial goals and helps identify potential hurdles and sacrifices that need to be made.

  • Control leads to greater confidence. Having a plan leads to greater confidence for both partners, which brings greater peace of mind that a solid roadmap is in place to achieve their goals and dreams. Review the plan at least once a year to adjust for life changes and to ensure everyone is still on the same page.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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