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Financial Planning > Behavioral Finance

Capital Control

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It’s no secret that not all couples are alike. When it comes to raising families, running a household, or making a decision about what to eat for dinner, couples function and communicate in different ways. It seems these differences leak into the financial world of as well. In fact, it appears there are four distinct trends among couples when it comes to financial arrangements. Hartford Financial Services Group and the MIT AgeLab teamed up to explore how couples approach their finances and communicate about long-term goals. In November and December 2007, researchers conducted telephone interviews with 837 pre-retirees and retirees between the ages of 45 and 74 who were married or living with a partner. Four distinct planning styles emerged from the research.

The first two positions people in relationships take are that of the “driver” or “passenger.” According to the study, about a third of couples (36%) reported that one spouse is the dominant financial manager. Of this group, the drivers (17%) handle all financial matters of the household while the passengers (19%) are either minimally involved or are completely hands-off from financial matters. Maureen Mohyde, director of corporate gerontology at The Hartford, is quick to point out that the primary managers are often men, while passengers are often women, and that there is “no strong correlation across wealth groups and ages.” She also states that this may account for the pattern of widowed women facing financial challenges later in life, when the woman suddenly has to be concerned about finances after living for years without any knowledge or expertise in such matters.


The third position taken among these couples is that of equal collaboration in financial matters. Just over half (53%) of the respondents said they were part of a couple where both partners are equally involved in all aspects of financial management for the household. These “joined at the hip” managers do not divide or delegate financial tasks, choosing to make every financial decision and take every action together. The final position couples took was a “divide and conquer” approach (11%). The divide and conquer duos were part of a couple where each partner takes the lead on some aspects of the household finances and plays a secondary role on other aspects. According to the MIT and Hartford researchers, this final style of divide and conquer is considered the new “retirement planning power couple.”

“A shared management style is an essential approach for couples today,” said Mohyde. “However, the couples who seem to have the most success in financial planning for retirement are those who practice a division of labor.”

Of the four financial planning styles, partners who practice the division-of-labor approach to managing household finances reported notable successes that stood out from the other groups. The study found that these couples were most likely to have prepared a contingency plan to assure the financial security of the surviving spouse (45% vs. 32% for joined at the hip, 27% for passengers and 8% for drivers). Additionally, divide-and-conquer couples also stood out as “super savers”–38% of this group had saved at least $750,000 for retirement vs. 16% who had achieved that savings level among joined-at-the-hip couples, 25% among passengers, and 17% among drivers.

Furthermore, researchers found that these traits of divide-and-conquer couples translate into a higher reported enjoyment of retirement. Some 46% of divide-and-conquer couples say they are enjoying retirement more than they expected (versus 29% for joined at the hip, 23% for drivers, and 18% for passengers). Joseph Coughlin, director of the MIT AgeLab, notes that couples using the divide-and-conquer style are “increasing their capacity to deal with the volume, velocity, and complexity of financial decisions today…this allows them to more effectively plan now for their financial future.”

The study also found that these newly named “power couples” are significantly more likely to seek the assistance of a professional financial advisor (72%). When planning for the future, Coughlin advises in looking at these couples as a corporation, “not just thinking about the joy of being a couple, but what is it that [the couple] wants to do and be years from now.”

E-mail Staff Editor Kara P. Stapleton at [email protected].


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