In 2021, Fidelity Investments conducted a study to gather insights into women’s attitudes and behaviors surrounding investing. While more women than ever are taking a seat at the investing table, only 31% feel confident planning for their financial needs in retirement.
As an experienced financial advisor, I have found that, within married couples, one spouse is typically less interested in being part of the financial decision-making process. Often, it is the wife. While this article is directed towards women, the advice it contains can be applied to men and women alike, both in and out of relationships.
A lack of financial awareness can create several problems.
In the scenario of a married couple, the most extreme issue arises when the spouse who takes care of all financial decisions dies or is incapacitated. The surviving spouse is then “thrown into the deep end:” They must try to make sense of account information, expenses, investments, life insurance policies, and, in some cases, business finances. This adds an incredible amount of stress to an already difficult time.
Another set of problems can develop when the spouse who is not involved financially has no “buy-in” when it comes to the couple’s financial plan . For example:
- The less-involved spouse may not understand what the couple owns within their investment portfolio and why they own it. If this spouse has a low tolerance to market volatility, seeing the market drop without understanding that the investments in those funds are long-term assets that can withstand day-to-day market fluctuations can be very stressful.
- A spouse who has not been part of the financial planning process may also have difficulty understanding and sticking to a budget or plan. It is easier for a couple to accomplish their financial goals together if they are on the same page regarding what those goals are and how they will go about accomplishing them.
Retirement planning also involves several important decisions that affect both spouses. For example:
- When making pension elections, the single life benefit option offers the highest monthly benefit available; however, once the owner of the pension dies, that benefit stops, and the surviving spouse is left with a reduced monthly income. Combined with the termination of the lower of the two social security benefits upon the death of the first spouse, this may have a dramatic impact on the surviving spouse’s ability to support themselves.
- Social security planning can also impact the surviving spouse’s income. Overall, women live longer than men. It is important to plan for both spouses when deciding when and how to claim social security benefits.
Married and single individuals alike can suffer from investing in the wrong types of funds or not understanding the expenses being charged. Many men and women don’t know anything about the funds they own or the expenses they are paying within their retirement accounts.
The most important thing you can do is to get involved. Engage yourself in the process. Attend meetings with your financial advisor. Learn more about the areas you don’t understand. Ask questions.
Engage. Whether you’re single or married, male or female, if you are not already doing so, start tracking where your money is going. Create a budget; meet with a financial planner to discuss what your retirement needs; and create estate planning documents like a will, a living will, and power of attorney. This is a good start to becoming more involved.
If you are married and your spouse takes care of the finances, learn where the income is coming from, what your monthly expenses are, what investments you hold, and why you hold them. Find out if you have life insurance and make sure your estate planning documents are up to date and that you have access to them in case of an emergency. If you have a financial advisor, attend meetings with your spouse.
A study conducted by the Life Insurance and Market Research Association (LIMRA) suggests that men focus on revenue while women focus on expenses . Teamwork between a husband and wife oftentimes makes financial planning more successful by leveraging the two spouses’ complementary skills.
Educate. If you’re like me, you tend to tune out or disengage in topics that you don’t understand. The solution is to work on gaining a better understanding of these topics. To increase your financial literacy, you can read books, take online courses, and even enroll in community classes offered by local universities.
For a general understanding of investing, our firm recommends The Investment Answer by Daniel Goldie and Gordon Murray. The advice in this book is simple, easy-to-follow, and effective, and it can lead to a more profitable portfolio for every investor.
Ask questions. If you don’t understand the purpose of owning a particular fund within your portfolio, ask your advisor. Ask about the expenses you’re paying on the funds you own. Ask how your advisor is compensated. If you don’t understand your options on your 401k, go to your human resource director and ask for help. Talk to your spouse about pension options. Talk about social security planning. There is no such thing as a stupid question when it comes to financial planning.
It is important for both women and men to be cognizant of their financial world, at the very least, and ideally, to be actively involved in planning for their financial future. When you actively participate and have a voice in your financial planning process, you substantially increase your chances of not running out of money before you run out of life.
Lyndsay Goody is a financial advisor with Onyx Financial Advisors, LLC, an independent fee-only registered investment advisory firm located in Idaho Falls, Idaho. She can be reached at (208)522-6400 or at www.OnyxFinancial.com.