In most couples, one spouse manages the bills and the assets. But both spouses need a baseline understanding of the family’s finances. Only 28% of couples were “completely confident” that either spouse alone was prepared to steer their joint retirement finances (from a recent study from Fidelity Investments).
Several years ago, I met a couple who had been married 45 years. From day one, they sat down, opened their bills, and wrote out the checks each month together. This was a healthy way to approach the couple’s finances.
As we know, things happen: Disability, Divorce or Death can place new responsibilities on spouses – even when they are unprepared. The result can range from difficult to disastrous. My aunt’s mother had never written a check, or driven a car in fifty-plus years of marriage, and had many struggles when she was widowed.These situations are out there and do happen.
Considering the “what-ifs” can open uncomfortable questions for couples who are not accustomed to sharing financial information. We think it can wait until tomorrow, but talking about these issues helps us to plan ahead – and prevent those difficult or disastrous results.
A key item of information to share is an inventory of assets. This includes the following items and more:
Retirement accounts, checking accounts, whose name is on what account and remember to share the log-ins and passwords for the online assets;
Insurance policies and their status and the beneficiary for each account;
Where the emergency fund is located and how to access it;
Each parnter should understand both partners’ current and future income sources, including stock options and deferred compensation.
Other assets include: House, car, boat, airline miles, hotel points and vacation timeshares. There may be a collection that is valuable over time. (Example: my aunt’s brother collected coins all over the world and when he died suddenly, his spouse did not have a clue of the value of the collection.)
Create a list in the order the assets should be tapped either in retirement or in case of emergency, with an eye toward maximizing the asset’s value and avoiding taxes or penalties for early withdrawal. Put the list in a safe place after you have discussed it with your spouse.