Find common ground — and common long-term goals — with your spouse when you don't see eye to eye.
It's often said that opposites attract, but opposing investment strategies may be enough to strain a marriage.
Perhaps one spouse is a risk-taker and the other is a risk-avoider when it comes to investing, or one leans toward socially responsible investments while the other is purely concerned with profit. If your risk tolerance and investment style differ from your partner's, how can you invest your combined wealth so both of you can sleep at night?
Tip One: Consider Your Long-Term Goals
For starters, "focus on dreams or goals and we can help you identify the dollar figure that is probably needed to achieve your desired outcome," says Cathleen Ringo, Vice President and Wealth Advisor at Regions Private Wealth Management in Charlotte, North Carolina.
"Where do you want to be in 30 or 40 years? What do you want life to look like? Discuss the age you'd like to retire, the legacy you want to leave, whether you want to downsize to a smaller home or buy a vacation home, and whether your lifestyle will include travel or an expensive hobby," Ringo says. "Your goals at this point may be somewhat obscure, but we try to get as many details as we can."
Tip Two: Work With Your Advisor
You'll also want to consider working with your financial advisor to calculate how much money you'll need to make your vision a reality. "Once you've painted the picture," Ringo says, "we can help you determine what it will take to get you there."
Often, this involves showing the historically likely outcomes of each partner's preferred investment strategy, and it tends to become clear at that point if your portfolio can be or needs to be adjusted to reach your goals. This exercise doesn't necessarily favor the riskier strategy, because the point is to invest with as little risk as possible and still reach your long-term goals, Ringo says.
Tip Three: Comes to Terms with Differences
If one of you still wants to be more aggressive, Ringo recommends setting up a "small side account" as long as you both agree that a total loss of the money in that account in a worst-case scenario won't hurt your long-term financial goals as a couple and won't create resentment. Keep in mind that your respective retirement investments are in individual accounts, "so while you should use those retirement vehicles to invest however you're most comfortable, make sure they are in line with the overall financial goal of the couple," she adds.
Don't lose sight of your shared goals because retirement accounts are often considered marital assets under property laws. Even if you and your spouse opt to keep your investments separate, your investment strategies should be geared toward those combined goals.
If risk tolerance is an issue, remember that gains aren't always financial. There's a case for skewing the portfolio toward the more conservative or vulnerable investor. In many instances, it's better to risk too little than too much. And the dissatisfaction the aggressive investor feels about lower returns is probably not as potentially threatening to the relationship as the stress or panic experienced by the conservative investor in a bear market.
However you and your spouse decide to invest, "don't just make a plan and let it sit there," Ringo says. "Have annual reviews where you ask yourself, ‘Are we where we need to be? Are we playing it too safe? Is this comfortable? Do we need to make changes?' Life changes. Things change. Goals change. So you need to review all of that - together, as a couple - at least annually."
Learn more about planning your retirement roadmap with your spouse.
