Fundmastery Blog

Kurt Brouwer September 28th, 2007

Seeking Wise Counsel–At Home

Seeking wise counsel is probably the best way to get started with retirement planning, whether you are retired now or still planning for the future. Certainly, talking with a financial adviser is important as is talking with your accountant, attorney and your family. However, communication with your spouse is absolutely imperative, yet as this article in the Wall Street Journal shows, good spousal communication is rather rare. Glenn Ruffenach reports on a couple of studies of couples by Fidelity Investments and other organizations [emphasis added]:

‘A study published earlier this year by Fidelity Investments in Boston underscored what many financial planners already know: Wives and husbands aren’t taking time to discuss and plan for later life. In Fidelity’s survey of 502 couples — in which spouses were questioned individually — 41% disagreed when asked whether at least one partner would work in retirement, and 35% differed when asked about each other’s expected retirement age. In all, only 38% said they worked together on financial planning for later life…’

I can attest that couples often have divergent points of view on these issues. However, I was surprised that only 38% of couples in this study had worked together on planning their finances for later life. At its most basic, financial planning or retirement planning starts at home. The article continues:

‘…We asked financial advisers and couples across the country to identify the most important questions that spouses should ask each other about retirement — ideally, at least five years before leaving the office. In many cases, their suggestions focused on lifestyles first, and finances second. Here are the most-suggested conversation starters, along with some advice and observations from those interviewed…’

“What is our vision of retirement — and do we share the same vision?”

Wives and husbands should ask each other how they want to spend their time in later life (traveling? volunteering?) and what a typical day might look like. The mistake comes in assuming that your partner shares your dreams about retirement and wants to pursue the same activities. Hiking the Himalayas, in fact, may be the last thing he or she wishes to do.

“Retirement sometimes creates fissures in long-term marriages,” says Lenore Forsted, age 61, a community volunteer and retired lawyer in Wynnewood, Pa. “All those interests that people developed over decades of marriage suddenly assume more importance — and it’s not always true that they lead in the same direction.”…’

Developing a common vision is extremely important, but it should be clear that it takes time and effort and a sense of sharing and compromise in order to reach a common vision. In most cases, couples will have different views on things and discussing these in a spirit of sharing is critical. Other big issues have to do with how each person views investment risk and reward as well as balancing present spending with future needs.

The article continues:

‘…“What assets do we have for retirement — and are they invested in the most beneficial ways to achieve our goals?”

In many households, one spouse manages the finances, and the other, frequently, has little or no knowledge about retirement planning. In the event of illness, divorce or death, that ignorance can be crippling.

With that in mind, ask yourself: Do you know what retirement accounts you and your spouse have? Do you know how much money you’re contributing to each account and the size of the accounts? Do you have contact information — names, phone numbers and account numbers — for each part of your retirement savings?

Beyond knowing the contents of their nest eggs, couples should have financial goals for retirement and a plan to reach them…’

Setting clear financial and investment goals is important, but it is not enough. You need a solid, step-by-step plan for reaching those goals. But before any plan can be implemented, it has to be created and agreed upon by the couple. Both husband and wife should be active participants in creating their retirement goals and in creating a plan for achieving them.

So, if you are planning for retirement or if you are already retired, it would be useful to have regular family meetings in which you review everything associated with your financial future–budget, Social Security, investments and more. If you tend to be more knowledgeable on these matters, then take the time to share your knowledge. Your husband or wife may be forced into making important decisions if something happens to you and so he or she needs this information as well as an understanding of what your values are.

If you tend to be less involved in this area, make sure you ask good questions and get a working knowledge of everything you have. You may not have as much knowledge as your spouse, but you have many years of practical experience in living and your counsel may well help keep you on course.

So, always seek to have a meeting of the minds with your spouse. If you do, you will be a member of a rather rare group–the 38% of couples that actively seek each others’ counsel.

• Personal Finance , Retirement
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