Couples' Therapy: Investing Together

Planning Your Future Forming Money Habits

You like to take risks when investing. Your partner would rather play it safe. So where do you go from here?

Many couples grapple with this dilemma. While it might seem like a good compromise to split your funds and invest as you each see fit, that likely won’t bring peace—or wealth—into your relationship. In a marriage, for one thing, whether accounts are titled separately or jointly, they’re considered marital assets (even 401Ks). And a healthy relationship hinges on working together toward financial goals, not going it alone.

One reason some couples have contrasting approaches to investing is they also have different ideas about what’s needed to retire. According to Fidelity’s 2015 Couples Retirement Study, 47% of couples disagree about how much money they’ll have to put away to maintain their lifestyle in later years. Some couples—33% according to a Harris Poll survey for NerdWallet —aren’t saving a dime for retirement. Of those who were, one in five said they didn’t know how much their partner was contributing.

Which brings us to our first tip for going down the investment road—together:

1. Communication is key 

Research your options and make a joint plan. Matching tolerances for investment risk can be one of the biggest hurdles for couples, so communication is vital, especially considering how much you both will be putting toward your retirement and future plans. Erica Coogan, partner at Moss Adams Wealth Advisors in Seattle, recommends each partner fill out a risk assessment questionnaire and then compare answers.

2. Planning needs to cover both spouses 

Experts advise couples to watch out for the “It’s my money because I worked for it” syndrome. Couples need to work together on a plan for investing (and spending) their money, regardless of who earns it. Apart from resentment, an uneven division of assets can make a mess of cash flow, estate planning, and taxes.

3. Consider transparency 

Wherever you stand on taking risks, consider some investments that are transparent by nature, like individual stocks, bonds, and exchange-traded funds. You can also reduce risk by diversifying your portfolio across asset classes. Ask a SELCO financial advisor for help in untangling the strands of modern-day investing.

4. Think about your time horizon 

What sort of timeframe are you working with? On one side of the coin, allowing an investment to compound leads to higher returns. So if you’re the more risk-averse one in the relationship and you’ll need the money in 10 years, you can say with confidence to your partner: “Slow down.” Even if it doesn’t make intuitive sense, remember that your money doubles in seven years if you earn a compounded annual return of 10%. Don’t let a little fumbled math lead to a rash or risky decision.

5. Keep your goals in sight 

Your mutual goals will determine how, and how much, you should invest. When do you want to retire? Do you plan to pay for your kids’ college expenses? Are you hoping to buy a house? Do you dream about starting a business? Asking—and answering—these kinds of questions is crucial. After all, how do you prepare for your destination if you don’t know what it is (and all the stops you’ll take before you get there)?

Finances are stressful, and even seemingly straightforward decisions can cause relationship strain. But the more openly couples communicate about this potentially rocky topic, the less likely they’ll be to panic when there’s a ripple in their plans or the market fluctuates. Keep the channels open and everything in plain view, and you’ll have a much smoother path forward.

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