Couples' Finances: Silence Is Not Golden

Many couples have a communications gap when it comes to their finances. Morningstar director of personal finance Christine Benz recently talked with Kristen Robinson Darcy, senior vice president of Women & Young Investors at Fidelity Investments, to discuss the findings of the firm's 2015 Couples Retirement Study.

Christine Benz: Fidelity periodically interviews couples about their money habits and their communication around money. I thought the latest study had some stark takeaways in terms of how couples communicate about their finances. One takeaway: In many couples, the partners don't even know what one another's incomes are.

Kristen Robinson Darcy: Fidelity does these studies every two years, and we survey more than 1,000 couples. When we asked the question, "What does your partner make and bring home," we found that 40% of these couples said that they do not know. In fact, they didn't know by about $25,000.

Benz: Fidelity didn't ask participants to hit the number right on the button, just in the right ballpark--and people weren't close.

Darcy: That's exactly right. It was a range. And what was really ironic was that before that question, we asked if these couples were aligned with regard to their finances. And more than 70% responded, "Yes, we're aligned. We know we're on target. We're in the same place." Yet, only 40% knew how much their spouse made.

Benz: The study suggests why this might be so. One reason is the fact that a lot of workers are doing more contract work. Plus, some pay is variable.

Darcy: Yes. That's right. And then, lastly, markets obviously fluctuate. And for those retirees who are withdrawing from their 401(k) accounts, their balances and, therefore, their incomes from those accounts obviously change.

Benz: Another area where you found that couples aren't really intersecting is in terms of their investment assets. In particular, couples aren't aware of what they have.

Darcy: Not only do couples not know how much they make, they also are challenged with how many assets they have. About 50% of the respondents were unclear about their total assets.

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Benz: In addition to a knowledge gap, the study uncovered a planning gap as well. The research shows that many couples are not sitting down together and talking through some important planning issues--specifically related to retirement planning and what retirement will look like and how they will get there.

Darcy: That was another surprise that we found: Nearly 50% of these couples were not on the same page with what their retirement looked like. Then, we asked the question, "Are you on the same page with regard to your finances? Do you know if your money will support you for the remainder of your life?" And about 50% were not on the same page with how much they really needed to save or have in place for retirement.

Benz: When you say they are not on the same page about what retirement will look like, do you mean that they haven't talked through where they will live, whether one person will work part time--those sorts of things?

Darcy: Absolutely. That's something that we think couples need to get on the same page about very early on. For example, when they retire, do they want to travel the world, or do they want to buy two homes or own just one? And those are the decisions that really need to be talked about so that when they look at the money they have for retirement, they can understand how far their money will get them.

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Benz: Another thing that jumped out at me in the study is, couples are worrying more about money than they were a couple of years ago. It's counterintuitive. The economy has been good. The market has certainly been quite good. Why do you think that's happening?

Darcy: We found that the couples that are not worrying are the couples that have planned--the couples that have a retirement plan in place and have spent time mapping out their plans. They are confident that their money will last, and they are confident that their plan is the right one. It's those couples who do not have a plan who are worrying. As more and more baby boomers are getting older, some of them are coming into retirement not prepared, and these are the ones who are finding themselves in a very uncomfortable spot and not confident about what their plan is and what their future is.

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Benz: Fidelity has pulled together some key topics couples who want to try to bridge the planning gap or bridge the communication gap should address. Emergency funding is one.

Darcy: Emergency funding is very important. As is really understanding what your medium-term goals are. What do you as a couple want to do in the next three to five years? And then put a plan together for that. Also, couples need to make sure that they are in sync with what their plan is. We found that couples thought they were in sync; but really, when it came down to it, there were some disconnects in their financial foundation.

And finally, it's important to start early. For these young millennials, it's so incredibly important for them to make decisions together.

Benz: You asked more seasoned couples to share their advice, and they said, "Get started on that retirement funding as early as you possibly can."

Darcy: And make decisions together--because the decisions that you make together will be the decisions that you continue to check up on an ongoing basis. And you might need to change them as your life changes, but at least they will keep you on the same page.

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Benz: One simple technique that I know you are a believer in is writing down your financial goals, asking your spouse to do the same, and then seeing where you have matches and where maybe you have mismatches. Then, those are things you need to talk about.

Darcy: That's very, very effective. We also have a couple's quiz that enables both spouses to take the quiz, and it identifies what those gaps are.

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