You May Love Each Other, But Should You Invest Together?

    It’s one of the most important questions a couple will face in their relationship but it rarely gets asked until a relationship is well underway – should we pool or separate our money for investment? The answer is as unique as the individuals involved. But there are some critical facts and some questions to consider as you develop a lifetime financial strategy.
    Pooling can be a great idea after a marriage because the two of you are legally bound together, so why not bind your finances for potential maximum return? Many financial experts believe it’s a good idea for the simplest of reasons: With the right advice, the bigger the pile of money two can gather the greater the potential for financial gain.

    But there’s more to it than simply combining your assets. Pooling your investment dollars should produce not only shared decision-making, but shared awareness of everything going on with your finances for a lifetime. It’s the kind of cooperation that will not only benefit you all the years of your marriage, but also provide a surviving spouse the knowledge to function when the other dies or is incapacitated.

    It’s a move that women, in particular, need to consider—it is to their advantage to maximize the total investment pie because chances are they will be the lower-earning spouse. They may go years without income if they stay home to raise children. If the marriage breaks up—as roughly 40 percent do these days—she’ll need extensive assets to prepare for retirement. Statistically, with or without divorce, a woman’s retirement will be longer than that of her husband.

    Let’s look at a couple who want to plan separately. What might the reasons be? One spouse may have assets he or she wishes to protect from a high-risk business proposition. There may be significant inherited family assets that need to be protected for heirs from potential loss in a divorce. And, of course, the least attractive reason: one spouse simply doesn’t trust the other.

    These issues are all good reasons for a couple planning to marry to sit down with a trained Certified Financial Planner™ professional to go over their respective and combined goals for home ownership, retirement, kids’ college savings and various other lifestyle goals. A visit to tax and relevant legal professionals makes sense before the wedding as well. Here are some other things to consider:

What approach will get you to your goal faster? Young people starting out literally need to save every nickel for a first home. It makes sense to figure out how much you can put aside jointly and where to invest that money based on your risk tolerance.

How can your employer help? Contribute the maximum to your 401(k) and other retirement savings options – particularly if there’s company matching involved. Check all employer benefits to determine the best options for you and your spouse. For example, it might be a better value for both of you to be on the same health plan. Find out if and how a health savings account might be part of your overall joint investment strategy. Also, don’t forget employee discounts that might cut your overall household spending.

Let your competing investment styles compete. There are plenty of studies on this, but the results seem to hold steady: men tend to take more investment risks; women seem to be risk-averse. The advantage to working with a trained financial expert is using their ability to make solid investment suggestions for you, as well as identifying the differences in your investment approaches to find compromises that work best for you as a couple.

Talk. Talk about your financial expectations and what goals you’d like to achieve. Talk about what you’re afraid of. And most importantly, talk about your money history – your credit rating and score, any troubles with credit in the past, including bankruptcy. Oh, and if you survive these initial discussions, make a promise to talk about money once a month.