Couples, take this test to see if retirement plans agree

The Bakersfield Californian
August 19, 2011

Several months ago, a 50ish Bakersfield man who works as a manager for a local business, sought my help with developing a retirement plan.

He is married with one child, a daughter, who will enter college next year. His employer provides access to a 401(k) plan. The man and his wife have been good savers. They are on track to have a nice retirement fund.

But the man prefers to “go it alone.” That is, he handles all of the family’s financial matters. Not only does he not share the responsibility, he also is adamant about not sharing financial information with his wife.

For example, when his daughter brought home forms this spring to fill out to determine her eligibility for federal educational aid, he refused to provide the family’s financial information. He told me his intent was not to hide it from the government; rather, it was to hide it from his wife. He reasoned that even with disclosure, the family’s income was too high for assistance.

Clearly my client’s refusal to share financial information with his wife is the exception, rather than the rule in most marriages.

Typically, the normal tendency is for one spouse, usually the one responsible for paying the bills, to become the primary financial decision-maker. As a result, the other spouse can be left in the dark, or at least in the shadows.

Consider my clients, who we’ll call Bill and Angie. Bill was ready to retire and thought he had saved enough money. But he never bothered to share his plan with Angie. As a result, she was extremely hesitant and insisted he continue working. While Bill did not have a written retirement plan, his estimations were correct. Between his pension, Social Security and his 401(k), there was enough money for them to retire.

I helped lay out a written plan showing the couple how they would create income from their various assets. When Angie saw the numbers, she still was not convinced. I could sense Bill’s frustration. After nearly 40 years of work, he was ready to retire. His numbers and plan looked good.

As it turns out, Angie agreed that they had enough money and that Bill should retire. What she had not understood was when and how money from their various income sources would arrive in their bank account.

They had never looked at their retirement together. They never developed a plan. She did not know how much money they had, or what would happen to her income if Bill died. Once she understood, she was ready for him to retire.

I teach a course on retirement planning for the Levan Institute of Lifelong Learning at Bakersfield College. On average, more than half of each class is comprised of only one spouse. Few couples attend.

Any time a couple does something financially related, they should attend meetings together, whether it is financial planning, taxes or refinancing a home. Regrettably often only one is interested and willing.

This response is consistent with the results of a recent nationwide survey sponsored by Fidelity Investments Life Insurance Co.

The survey interviewed couples ranging in age from 46 to 75. Nearly 1,300 people participated. Some highlights of couples’ responses help explain the disconnect we are finding with retirement planning: almost two-thirds did not agree on the age at which they will retire; one-third disagreed or did not know where they will live once they retire; 47 percent did not agree on whether they will work in retirement; 73 percent disagreed on whether they had completed a retirement-income plan; and more the 50 percent disagreed on their top source of retirement income.

When asked in the Fidelity survey what they would advise young couples today, respondents said: Make all financial decisions together; create a budget and stick to it; and set up an emergency fund to cover six months of expenses.

This is good advice for young and old, alike. It is also critical that couples work together to develop their retirement plans.