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How to Help Your Spouse Understand Your Investments

Married couples are expected to share everything – money, household chores, even each other’s personal thoughts.

In retirement, couples typically combine their savings into one investment portfolio to help fund their financial goals. Unfortunately, they do not always share the responsibility and investment knowledge needed to properly manage that portfolio. One partner may be disinterested in all things financial. Or, one partner may feel it dutiful to manage their investments on his or her own.

If you’re solely in charge of investing, your spouse could be dangerously unprepared in the event you pass away or become incapacitated. That’s because your investment portfolio is an important retirement income source. According to the Employee Benefit Research Institute, around two-thirds of current workers expect to draw retirement income from an employer-sponsored plan, an IRA and other personal savings and investments.

Wives are more vulnerable than their husbands simply because women live longer than men. In fact, a 2006 Iowa State University study found that among baby boomers, seven out of 10 wives will outlive their husbands. Although women have steadily earned more since the Greatest Generation, 41% of affluent women surveyed by Wells Fargo said they were “not at all confident” in their investing ability.

A surviving spouse will likely have no choice but to make investment decisions as income, taxes, time horizon and financial goals all change. You can help your spouse make the right decisions when the time is necessary by helping him or her understand your investments now. In other words, as a couple you should diversify investment responsibility. Here are some basic steps to do just that.

1. Show your spouse where the investment accounts are located.

Your investment funds are likely held with a custodian. Go over your account statements and show your spouse where you keep your investment documents and important information such as logins and passwords.

You may also want to review all beneficiary and estate planning information. Make sure everything is accurate and reflects both of your wishes.

2. Walk your spouse through your investment strategy.

What investments make up your portfolio? Why did you choose those investments? If you follow a complex active strategy that you struggle to explain, then it may be a sign that it’s not appropriate for you or your spouse.

On the other hand, index investors should explain the long-term benefits of index funds. Key talking points would be that index funds are generally cheap, letting you keep more of what you earn; investing in an index can keep you from market timing, which is extremely difficult to do well over long periods of time; and broad diversification can help spread your risk.

Explain portfolio management topics such as the importance of asset allocation and periodic rebalancing as well as their effect on risk and expected return.

Also, what’s your withdrawal strategy? How much do you withdraw to help fund your financial goals? Remember, your spouse could have 25-30 years of retirement left, a long time horizon in which your investments need to last.

3. Introduce your spouse to the professionals you trust.

If you self-manage your investments, getting your spouse involved will likely be more of a challenge. You may want to consider finding a trusted investment adviser that will assist your spouse if anything happens to you. If you have an investment adviser, it can be beneficial to extend that relationship to include your spouse.

Have your spouse join meetings or calls with your adviser. How transparent and informative your adviser is can be a good measurement of his or her value. Retirees are major targets for financial fraud. Your spouse should know the difference between a fee-only adviser and a broker who receives commissions for selling certain securities.

4. Be patient.

It may take months or even years for someone to understand the mechanics of a portfolio and the market. Improving someone’s investment acumen may take time, but it’s worth the effort.

It may seem noble to manage your investments so your spouse doesn’t have to worry about them. However, you can better ensure your spouse will be okay in the future if you empower him or her with information on how to invest.

Helping your loved ones invest shouldn’t stop with your significant other. See how you can help mom and dad with these Precautionary Steps to Help Secure Elderly Parents’ Investments.