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How Couples Screw Up Retirement Planning

It's not what they're doing wrong, it's what they're not saying

In theater, a play for two actors is known as a two-hander. Well, for couples, retirement planning should be a two-hander, too. Turns out, according to a new NerdWallet survey, one hand doesn’t know what the other is doing.

NerdWallet and Harris Poll interviewed more than 1,800 Americans in a relationship — ones who are either married or living with a partner.  A third said that neither they nor their partner is saving for retirement. That’s depressing.

But the findings are even more disturbing among couples where at least one partner is doing so. They show how little communication is going on.

When conversations happen, they tend to be around the non-financial parts of retirement — “the fun stuff.”

“You’re in it together. This is not a solo endeavor,” said Dayana Yochim, a NerdWallet investing specialist. But the survey seems to indicate otherwise:

  • Of the 36 percent who said their partner is saving for retirement, about one in five (23 percent) don’t know how much the partner is contributing to retirement accounts.
  • Roughly the same percentage (21 percent) don’t have a general sense of the total value of the partner’s retirement account. Similarly, 21 percent who are saving for retirement say their partner doesn’t know how much they (the ones who are saving) are contributing to their retirement savings.
  • 30 percent of respondents with at least one partner saving for retirement don’t talk to the other about how much money they will need to retire.

What’s going on here? Or, more to the point, what isn’t and why aren’t couples talking with each other about planning for retirement?

The Verdict: Retirement Planning Is Not a Straightforward Topic

“Retirement planning seems like a straightforward topic, but it’s anything but. It’s riddled with emotional subtext, based on past experiences, unspoken expectations and how money was handled or talked about growing up,” said Yochim. “It’s so hard to know where to even start the conversation.”

The lack of communication isn’t, however, about financial secrecy, keeping an account hidden from a spouse or partner or financial infidelity. (A May 2016 Harris Poll for the National Endowment for Financial Education found that two in five Americans with combined finances lied to their partner or hid information about money.)

Absence of Malice

No, the reluctance to talk about retirement planning “isn’t being done out of malice,” said Yochim. This absence of malice is really a combination of silence and ignorance.

When couples’ conversations about retirement do happen, the survey said, they tend to be around the non-financial parts of retirement. They’re about where will we live and what will we do. Yochim calls this “the fun stuff.” About three-quarters (76 percent) of respondents where at least one person in the couple is saving for retirement said the couple has talked about such “general retirement planning issues.”

But “when it comes to crunching the numbers and getting a realistic snapshot of where they are financially, the numbers drop off dramatically. It’s like the conversational third rail,” Yochim said.

One reason: “People are fearful of what the numbers will reveal,” she noted. “That uncertainty leads to paralysis. They may feel they’re so far behind the curve, it’s pointless to even try” saving for retirement. “Going on in a state of blissful ignorance for couples is a lot easier than trying to calculate what reality is and how much they’ll need,” Yochim added.

The Color of Your Money

For couples, discussing how much money you’ve both invested for retirement and where that money is invested is vitally important for coloring in your retirement picture, though. “If you look at all your retirement accounts as one big portfolio for your future, you can see where you are strong, whether you have the asset classes covered and whether you need to rebalance your portfolio,” Yochim said.

Another key financial topic couples ought to be discussing regarding their retirement is debt. Specifically: How much does each partner owe and how will the couples whittle these amounts down so they’re not drowning in debt when they retire?

“I always like to advise couples to be on the same page and work towards reducing debt and plan for their retirement as early as possible,” said Jason Miller, national head of wealth planning at BMO Wealth Management. A new survey from his firm found that boomers called reducing or eliminating debt their most important financial priority.

“Having honest and frank discussions about your philosophies toward credit, debt and financial milestones such as retirement are fundamental building blocks toward establishing responsible credit behavior,” said Diane Moogalian, vice president of customer care at Equifax (one of the nation’s three big credit bureaus).

The Sting of Debt

And once couples retire, Moogalian says, being vigilant about “credit may be more important than ever.”

Over the past few years, she noted, there’s been a rise in the number of retired-age people carrying more debt, including credit card debt, one or two mortgages and student loan debt for children and grandchildren. The average total debt for people in their 60s is around $50,000, according to Equifax Credit Trends. And the BMO Wealth Management survey said only 40 percent of Americans age 60 to 64 own their homes outright with no mortgage debt. Some of those who still have mortgages, said Equifax Deputy Chief Economist Gunnar Blix, are “people who faced financial woes during the Great Recession.”

So how should America’s mum couples start talking about retirement planning?

“I would tell them to start by talking about lifestyle goals that you’re both excited about. It’s easier to achieve them if you then move into the logistics of getting there,” said Yochim. “Be cheerleaders and dreamers first.”

Next, start taking the steps to invest wisely and reduce debt. Sit down together with a free online retirement calculator and run the numbers. Then, ensure that your spouse or partner doesn’t withdraw or borrow against his or her 401(k). That’s retirement money — for both of you.

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