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Couples battle over 401(k)s
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May 20, 1998: 3:40 p.m. ET
You and your spouse may have 401(k) plans that are fighting each other
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NEW YORK (CNNfn) - Laurie and Charles Schott are a happily married couple whose finances have spent the past few years fighting tooth and nail.
Charles had an aggressive retirement portfolio. Laurie was more diversified. Both spouses have careers, and both are "two headstrong, energetic people," according to Laurie, who described herself as "panicked" about their retirement savings.
"We were both doing things through our employers, but I was the one who was really feeling out of control as far as having a plan."
When women were less present in the work force, retirement investments were usually coordinated under one person's employment program -- the husband's.
Now, with more women setting off for the workplace each morning, couples need to work harder than ever to make sure their retirement investments are coordinated, since both spouses may be putting money into 401(k) plans.
Unfortunately, financial planners say many spouses have investments that may battle -- and even defeat -- the goals a couple has for retirement savings.
In order to coordinate their investments, the Schotts turned to Brian Shea, a fee-only financial planner for Newkirk Financial Advisory Service, based in Georgetown, Conn.
Shea sees a lot of married couples walk through his door, and while many of those couples are working together on their marriages, their 401(k) choices are in the middle of a painful separation.
"Each (spouse) has done a fairly good job of making good investment choices," said Shea. "However, what we see is a lack of understanding of how those mutual funds work together."
Many younger couples have investments with different risks and returns. These differences usually arise because spouses often vary in the amount of risk they are willing to take.
The current bull market on Wall Street hasn't helped. Shea said he is seeing more and more couples with portfolios that are too aggressive as a surging market appears to make a stock retreat seemingly impossible.
"They have had their portfolio grow at such a good rate that they're too optimistic," he said.
Getting your retirement finances coordinated starts with thinking about your assets as a whole unit rather than two halves, said Adriane Berg, author of "Financial Planning for Couples."
How you should divvy up your 401(k) allocations depends on how far you are from retirement, how much you want to save and your individual threshold for investment risk but Berg says couples in their 20s and 30s can usually pursue a more growth-oriented strategy.
Your company 401(k) plans usually provide you with four or five mutual fund investment choices spanning a variety of risks. These funds can range from money-market funds, which are less risky but usually have a lower overall return, to more risky equity funds.
The trick, said Berg, is to make sure your allocation percentages are what you want. "It doesn't matter if one of the 401(k)s is all in one type of fund and the other 401(k) is in another as long as you have the right allocations."
Once this is done, don't view investments as static. Keep track of how your mutual funds are performing throughout the year and, Berg suggests, if you've had more success in one area and less in another, you should adjust your investments. This, she said, will insure you maintain a good balance, as long as you do it diligently over the long term.
The most contentious part of the process may be deciding how to allocate your money. Some spouses view risk as short-term volatility, said Maria Scott, editor of the American Association of Individual Investors Journal. Others who are looking at the long-term may be less concerned about such volatility.
These differences among spouses need not paralyze your retirement investing, said Scott.
"A compromise might be to get the conservative investor to look at the longer term with a more aggressive stock portfolio," she explained. "That can then be balanced out with very conservative investments, such as bonds."
This, she said, can make your investments stronger at both ends.
The benefits can go even beyond your finances, said Laurie Schott. "I feel tremendous relief now because we have truly investigated our finances and we have a solid plan."
-- by staff writer Randall J. Schultz
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