Of all the changes that retirement can bring, this may be the least welcome: an escalation of money spats with your spouse. As couples approach retirement, they are more prone to argue about how much to spend, how much to save, how to invest and how much financial help to offer their adult children. Such disagreements can turn the estate plan into a battlefield.
While couples of any age can fight about money, those entering retirement tend to be the most quarrelsome. Surveying couples age 25 and up last year, Fidelity Investments found that baby boomers had the highest level of disagreement about how much they need to save in order to maintain their lifestyle in retirement. And in a Harris Interactive poll, 36% of married 55- to 64-year-olds said money matters spark arguments with their spouses, compared with just 15% of married 18- to 34-year-olds.
Much of the bickering among near-retirees stems from anxiety over losing a steady paycheck, says Manisha Thakor, director of wealth strategies for women at BAM Alliance, a network of financial advisers. Couples facing the abrupt end of a comfortable salary may go into "fight or flight mode," she says.
Although money fights are nothing new, several factors are making them more intense for couples currently in or near retirement. Thanks to the long stretch of low interest rates, couples shifting more assets into bonds and cash as they approach retirement are earning underwhelming returns. That can exacerbate arguments about how aggressively to invest, says Kathleen Gurney, chief executive officer of Financial Psychology Corp., in Sarasota, Fla. And a slower-than-expected economic recovery, combined with longer life expectancies, has left many near-retirees sandwiched between struggling adult children and elderly parents who need financial help.
Couples who have been together for a long time may have stopped discussing certain financial issues after having the same money fights dozens of times. But they shouldn't let these disagreements fester. Compared with other types of marital disagreements, financial arguments are the strongest predictors of divorce, according to a recent study by researchers at Utah State, Kansas State and Texas Tech universities.
Some simple steps can help defuse the tension. Depending on the source of disagreement, it may make sense to divide financial responsibilities more equally between spouses, set up individual as well as joint bank accounts and set aside specific times to discuss money issues. In other cases, a warring couple may find peace with a postnuptial agreement that addresses spending and lifestyle issues in retirement or an estate plan that balances the needs of a surviving spouse against those of children from previous marriages.
Spenders versus savers. When it comes to financial personalities, opposites attract. People who consistently spend more than they should are attracted to people who spend less than they should -- and vice versa, according to a study by researchers at the University of Michigan, University of Pennsylvania and Northwestern University. Yet this is a "fatal (fiscal) attraction," the study found, since a marriage between a "spendthrift" and a "tightwad" tends to predict conflict over money.
The spender-versus-saver conflict often grows more intense in retirement, says Jeff Motske, chief executive officer of Trilogy Financial Services and author of The Couple's Guide to Financial Compatibility (Da Capo Press, $17). One reason: A spender working full-time has limited time for costly activities, while one who's retired can spend money full-time.
When a spender and a saver clash, "what works best is if each person feels they have some autonomy and some protective guardrails," Thakor says. That may mean maintaining a joint account but agreeing that each spouse can spend a certain amount each month with no questions asked -- and any spending beyond that amount is a joint decision. Or it could mean maintaining a joint account only for shared expenses, with each spouse having an individual account for hobbies, clothes and other expenses.
Spenders and savers may also argue about the timing of retirement. Half of couples in Fidelity's survey disagreed on when to retire. One way to compromise: The spouse who wants to work longer can scale back to three or four workdays per week, do some telecommuting or transition to part-time consulting, Motske says.
Another financial personality clash: The risk-taker versus the conservative investor. One spouse wants to load up on micro-cap stocks, while the other wants to keep the money in the bank. If you can't reach a consensus, it's often because you're only considering your willingness to take risk -- which is just one aspect of risk tolerance, Thakor says. You should also consider your ability to take risk: Based on your age, income and time horizon, can you afford to plunge a large chunk of your nest egg into biotech start-ups? And do you need to take risk? If Social Security and pensions cover your essential expenses and you've amassed a sizable nest egg, your appetite for risk may be much greater than your need to take it.
Helping the kids. The question of how much financial support to offer adult children can be one of the most divisive for older couples, advisers say. And when you add in elderly parents who also need financial help, many couples nearing retirement are "caught in a tug of war," says Ann-Margaret Carrozza, an elder law attorney in New York.
If you and your spouse disagree on this, try to get to the root of why your partner wants (or doesn't want) to help the kids, Thakor says. Maybe one spouse always had to fend for herself and thinks making her own way was a valuable experience, while the other still feels wounded by the fact that he didn't get help from his parents and wants to spare his child that pain. Often, couples can compromise by finding nonfinancial ways to help the kids, Thakor says. Instead of handing over money directly, for example, you could hire a career coach for a child who's struggling to switch jobs.
Checks and balances. When one spouse is handling all the family finances -- banking, paying the bills and making the investment decisions -- trouble may be brewing. Many money fights can be avoided if both spouses have a firm handle on the household finances and feel their voice is heard in financial decisions.
Mandy Walker, age 58, generally handled the bill-paying and investments during her 17-year marriage, which ended in divorce in 2007. But now she says she believes that sharing financial responsibilities and open discussion of money issues might have changed the course of the marriage. Walker, a divorce coach in Niwot, Colo., says she and her ex-husband "ended up not talking to each other about the decision-making process." Her advice to couples working with a financial adviser: "Go to the meetings together," she says, "even if the thought of money and numbers makes you want to throw up."
If one spouse is doing all the bill-paying and investing, "trading tasks is a really good idea," Gurney says. Perhaps once every few months the other spouse can pay the bills. That way, both spouses are up to date on the household finances. Sharing financial tasks can also minimize the risk of financial infidelity -- one spouse hiding big expenses or other serious financial moves from the other. Gurney works with one 74-year-old woman who thought she and her husband had agreed not to give their son money to launch a business. But after her husband died, she discovered that he had funneled the money to the son -- and the son couldn't pay it back.
Another way to keep the financial dialogue going: Once a month, schedule a financial "date night," when you can talk about big spending decisions, retirement plans and other money issues. Motske says that he and his wife have been doing this for 21 years, and "it has been a great part of our relationship." One Wednesday night per month, they go out to dinner and talk money. On a recent financial date night, they discussed the need to update their living trust and debated whether to buy their 16-year-old son a budget-conscious new car or a reliable used car. "At the end we both compromised," he says, with a great deal on a new Volkswagen.
Frank financial discussions are key for couples getting married at older ages, particularly if they have children from previous marriages. "When people get married later in life, they tend to be more set in their ways financially," and it can be harder to establish financial trust between the spouses, Motske says. Bonnie Sewell, a financial adviser in Leesburg, Va., and her husband have eight adult children from previous marriages and 12 grandchildren. Blending the families together meant discussing the financial promises that each had made to their adult children and their "very different money personalities," Sewell says. "I've got to have a lot of money in the bank to sleep at night," she says, while her husband is a "can't-take-it-with-you sort of guy." It all works because they've discussed and agreed on their shared financial goals, she says. In many cases, spouses may have financial goals in mind, but "if they haven't said it out loud, there are battles over how to spend time and money."
Postnuptial agreements. If you and your spouse are having the same money fights again and again, it may be time to consider a postnuptial agreement, says Emily Bouchard, managing partner at Wealth Legacy Group in San Diego. This is a legal agreement that you sign after you're already married or in a civil union, and it can help address a host of financial issues between partners, advisers say.
When drafting a postnup, Carrozza asks clients to think about the issues they'd like to address and write down five goals they'd like to achieve. From there, she says, it may take only a few hours to hammer out a postnup on such financial steps as paying down debt, buying a vacation home or cutting spending.
One divisive issue Carrozza has seen older couples settle in a postnup: spending on pets. In many cases, she says, older couples argue about spending on gourmet pet food or pricey veterinary operations. "I have some folks who are emptying retirement accounts paying for feral cats that they take care of," she says. In such cases, she says, the spouses can agree in a postnup to limit spending on pets to a certain dollar amount, or agree that when the pets die they won't be replaced.
Postnups can be particularly useful in settling some contentious issues in marriages or relationships between partners who have kids from previous marriages, advisers say. Often in such cases, the house is titled in only one partner's name -- and that partner's children from a previous marriage may be set to inherit the property. That can raise concerns about the surviving spouse's living arrangements if the homeowner dies first.
Bouchard worked with an unmarried couple who used a postnup to address financial security for the partner whose name is not on the deed. Their postnup spells out that she can stay in the home for 18 months rent-free if she survives the homeowner, and she will also receive a certain dollar amount from the estate for a set number of years. They "made sure all the children knew about" the arrangement, Bouchard says, to minimize the risk of squabbling after the homeowner's death.
While courts in many states have upheld postnuptial agreements, their validity is not clear in every state. Consult a lawyer about your state's laws before drafting an agreement.
Estate planning. Later in retirement, spender-versus-saver conflicts can become estate-planning arguments as the saver wants to live off income and dividends and pass the bulk of assets on to heirs, while the spender wants to die with nothing in the bank. To reach a compromise, look for places where your goals overlap, Thakor suggests. For example, she worked with one couple who reached a consensus by spending money on renting houses in various locations for big family get-togethers -- satisfying both the spouse who wanted to spend money on seeing the world and the spouse who wanted to devote everything to the kids.
If there are particularly contentious estate-planning issues to address, the first question is whether each spouse should work with a different lawyer, says L. Paul Hood Jr., who, with Bouchard, is co-author of Estate Planning for the Blended Family (Self-Counsel Press, $25). It can be difficult for a lawyer to offer each individual candid advice when representing a couple jointly, he says. Separate lawyers may make particular sense if only one spouse has children, one spouse is much wealthier than the other, or if there's a large age difference between husband and wife, he says.
Disputes often arise when one spouse wants both partners to have simple wills leaving all their assets to one another, and the other spouse wants to leave assets to children from a previous marriage or some other beneficiary. If both spouses leave everything to each other, they run the risk of disinheriting their children from previous marriages, Hood says. There's no guarantee that the surviving spouse will leave assets to the other spouse's children. In many cases, the spouse who's asking for the simple wills "simply wants to be taken care of," Hood says. So the other partner could resolve the conflict by providing for the financial security of his spouse as well as his own children in his will. For example, he might leave income-producing property in trust for the benefit of his spouse, with the principal ultimately going to his children.
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