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December 15, 2021 at 11:20 AM
What You Need to Know
- Sometimes it's best to set up individual accounts, at least for certain assets, with a joint account for family expenses.
- Each spouse can exercise control over their respective retirement accounts.
- Strategic asset allocation is another option.
Opposites attract, but when it comes to retirement planning, that can be a problem.
How do you advise couples who don’t agree about money matters?
Separate Accounts for Separate Goals
“We encourage married clients to identify their goals and intentions, prioritize them, and then fund them based on the level of priority,” says Bridget Venus Grimes, president of WealthChoice in San Diego.
But when their priorities diverge, sometimes it’s best to set up individual accounts, at least for certain assets, with a joint account for family expenses. “This allows you to have some feeling of financial independence,” says Winnie Sun, managing partner of Sun Group Wealth Partners in Irvine, Calif.
Differing Risk Tolerance
If there is “a drastic difference” in the partners’ risk tolerance, and they can’t “meet in the middle,” says Bryan Montemurro at Two West Advisors/GoalPath Solutions in Overland Park, Kan., each spouse can exercise control over their respective retirement accounts.
But this works only if, “when combined, the overall allocation is appropriate for the overall wealth plan,” says Christopher Briscoe, vice president at Girard, a division of Univest Wealth, in King of Prussia, Pa.
Strategic Asset Allocation
Eddie Ambrose, a partner at Sound View Wealth Advisors in Skidaway Island, Ga., says strategic asset allocation is another option. “Exposure to growth — i.e., stocks — and a ‘bomb shelter’ portion of the portfolio — bonds, alternatives and cash — allows families to stay invested and meet expenses by tapping into that safe haven,” he says.
Wade Pfau, professor of retirement income at The American College of Financial Services in King of Prussia, Pa., adds that it may be possible to find compromise “by building a lifetime income floor and then investing the more discretionary assets in a more aggressive manner.”
Alternative Income Sources
Yet with rock-bottom interest rates, it’s difficult to secure an adequate, protected income base. Timothy Brown of 360° Family Office in Boise, Idaho, recommends certain annuities with lifetime income riders. They are cheaper than they used to be, he says, and, with some contracts, “the benefit goes on until the second spouse passes.”
Another idea is the Buffer ETF (also known as defined-outcome ETF), which allows you to “stop potential market losses at between 5% and 30%,” says Michael Zmistowski at Financial Planning Advisors in Tampa, Fla. Gains are capped at 7% to 20%.
Communication and Compromise
Whatever solution, both partners must buy in. “When views are different, which is often the case, it can be challenging for both spouses to feel heard and seen,” says Shannon Stone at DHR Investment Counsel in Oakland, Calif. “The opportunity for us as advisors is to build rapport, trust, and understanding.”
At times, it may be necessary to “divide and conquer,” says Charles Sizemore, chief investment officer at Sizemore Capital Management in Dallas, “using the assets of one spouse to cover basic necessities and the assets of the other to cover vacations and entertainment.”
