Marriage brings both happy times and not so happy times – with most troubles stemming from financial issues, there are ways to get through them. For the 70 percent of people who will be married at some point in their lives, financial advisors say there many ways to benefit from the power of two. Here is a list of their best financial advice for married couples.
1. Talk openly about money even before you marry. “As soon you are married, or even before you get married, you should start talking about your goals and financial assets,” says Derek Gabrielsen, a wealth advisor with Strategic Wealth Partners in Seven Hills, Ohio.
2. Define shared goals. “You talk about building a life together – buying a home, having children, their college education and how you will protect each other’s health care and retirement,” says Diane Pearson, personal chief financial officer of Legend Financial Advisors Inc. “Financial planning might not be romantic, but there is some peace of mind in sharing the same goals.”
3. Stay in harmony with your shared financial plan. “A financial plan is just the starting point. Life happens and you need to make adjustments,” Gabrielsen says. A financial plan can serve as a reminder of what your big goals are and how to reach them. Financial planners can also act as intermediaries on tough financial questions.
4. Share costs. From home purchases to food shopping, there are efficiencies. By combining savings, couples can qualify for lower fees on bank transactions and retirement accounts. Account management fees typically fall below 1 percent a year for people with combined accounts of $250,000 to $500,000, and can be up to 2 percent for smaller accounts. Checking and personal loan fees can also be combined for significant savings.
5. Communicate about what you need. Women need to be more confident so they can engage in discussions about investing for retirement which recently issued a study on affluent women that shows low levels of participation. While 90 percent of the women surveyed said financial expertise matters, only 40 percent are confident that they have any, and fewer than half wanted to build their knowledge. Couples need to plan together, and women are too inclined to stay on the sidelines.
6. Pool long-term assets for maximum growth and safety. When you pool resources, you have more for down payments, better access to credit and you can invest more in growth opportunities, Pearson says. For homeowners, joint ownership can also add a layer of protection from creditors.
7. Share goals and diversify assets. “The more you have invested together, the more creative you can be in your asset mix,” Gabrielsen says. “It means you can diversify more widely to protect against risk if you combine assets. To get the most out of it, you need to coordinate both spouses’ holdings into one nest egg.” With a larger pool of money, “you have the leeway to add a few growth stocks with upside that you might not put in a smaller account,” he says.
8. Take advantage of tax benefits. “You might pay a bit more in income tax going from single to married, but there is a savings in taxes overall,” says Popovich, an expert on financial issues in same-sex marriages. In the case of the estate tax, couples can transfer $5 million to each other tax-free. “The ability to transfer assets to each other is really important,” he says.
9. Respect each other’s money skills. “Couples rarely have the same financial expertise, and it’s not always men who have more,” Pearson says. “The spouse with skills can lead. One might focus on day-to-day bill paying and cash flow, the other on investing. But both need to be involved with decisions or it can lead to bitterness.”
10. Support each other through ups and downs. “Spouses can really do a lot to take the pressure off each other,” Gabrielsen says. Women have moved near equality to men in terms of income and in a recent survey, they out-earned their male spouses.
11. Don’t give up on communication, even in a separation. An acrimonious divorce can be costly for both partners. Some people think they can hide income or property. “You really have to go to a lot of trouble to hide assets,” Gabrielsen says. Open communication about financial assets and costs can make the other parts of a split-up easier for all involved.
12. Use flexibility in Social Security and employer benefits. Social Security pays spousal benefits even for those who don’t work. Health care insurance and other benefits are useful, even when both spouses have their own. “Couples don’t always have the same time table for retirement,” Gabrielsen says. “They enjoy more flexibility when it comes to staggering their retirements, and I know a lot of boomers doing that.”
13. Perform regular financial checkups. “I find it very rare for couples who just want to go off and each do their own thing financially,” Pearson says. “Most people want to find a financial path and want stay on it. But it requires communication between spouses, creating a financial plan and updating it when things change.” Although it sounds basic, the Wells Fargo survey of affluent women found that less than half of them have a financial plan.
*Original article source courtesy of Richard Satran of US News.