Data & Research February 5, 2014

Couples Disagree About Retirement, Money Matters

Over one-third of couples disagree over matters related to money in general and retirement in particular, says a recent study.
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Fidelity Investments’ “Couples Retirement Study” finds that approximately four in 10 working couples (38%) disagree about the lifestyle they expect to lead in retirement. In addition, the study shows more than half (51%) of couples admit to arguing either frequently or occasionally about money, with 38% of those couples never resolving things in a mutually agreeable way.

Even if couples rarely fight about money, the study finds they do not necessarily agree with regard to financial priorities. More than one-third (36%) do not both know where important household financial and legal papers are kept, and approximately one-third disagree about who the primary beneficiary is on their life insurance policies (31%) and retirement accounts (27%).

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The study findings also reveal confusion when it comes to retirement matters, with 32% of non-retired couples disagreeing on the role working will play in retirement, and 38% not putting a plan in place to manage rising health care costs in retirement or not knowing they had to.

“The fact that many couples disagree about money isn’t surprising, but the realization so many don’t actually resolve their financial squabbles is cause for concern,” says Lauren Brouhard, senior vice president of Retirement at Fidelity, based in Boston. “When it comes to making your relationship a financial affair to remember, even the closest of couples have opportunities to get more on the same page. Just as you plan for everything else in life, it’s important to make financial planning a regular part of your conversations.”

With regard to financial planning, Fidelity recommends that couples ask each other:

  • Are you truly equal partners when it comes to handling the finances? Even if one person has assumed the role of family financial planner, it’s important both are prepared to take over as the “family CFO” if necessary.
  • Do you both have a handle on the insurance and brokerage accounts? Make sure you both know who the beneficiaries are on the life insurance policies or brokerage accounts, because there are legal implications if beneficiaries are not assigned. Discuss what retirement, savings and insurance is in place, and where important documents are located. This can help avoid family squabbles and unnecessary tax penalties in the years ahead.
  • Are you jointly maximizing your savings potential? Make sure each partner, if eligible, is contributing to tax-advantaged savings accounts, such as your company’s workplace savings plan or an individual retirement account (IRA). And, make sure to allocate your joint assets properly. Establishing and maintaining an age-appropriate asset allocation that adjusts over time is critical to savings success.
  • Do you have a shared vision for what your retirement might look like? Many couples do not. Are you looking to travel the globe, or simply tend the garden at home? Talk it over. If you are not on the same page about your goals, it’s hard to put the right plan in place.

An executive summary of the Fidelity study can be downloaded here.

In addition, an interactive Couples Quiz is available for desktop, tablet and mobile users here.

Compliance February 5, 2014

DOL Sues Contractors over Prohibited Loans, Investments

The Department of Labor (DOL) has filed a lawsuit against a Lilburn, Georgia contracting firm, on behalf of the firm’s retirement plan participants, to recover losses resulting from prohibited loans and investments.
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The lawsuit, Perez v. Burgess Baird Jr (docket number: 1:14-cv-00282-CAP), was recently filed in the U.S. District Court, for the Northern District of Georgia, Atlanta Division. It names Burgess Baird Jr., the fiduciary of the employee profit-sharing retirement plan, and DSI Contracting Inc. as defendants.

Through the suit, the DOL seeks to have the defendants restore all plan losses, including interest or lost opportunity costs to the plan, which occurred as a result of the defendant’s breach of their fiduciary obligations. The suit also asks the court to reverse each prohibited transaction. In addition, the DOL asks that the court permanently enjoin the defendants from serving as fiduciary, administrator, officer, trustee, custodian, agent, employee, representative, or having control over the assets of any employee benefit plan subject to the Employee Retirement Income Security Act (ERISA), and to appoint a successor fiduciary at defendant Baird’s expense.

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An investigation by the DOL’s Employee Benefits Security Administration (EBSA) found that after establishing a profit-sharing retirement plan for its employees in March 1980, DSI Contracting Inc. and Baird failed in their fiduciary responsibility to the plan, committing prohibited transactions by causing the plan to purchase real estate contiguous to property DSI was developing, known as the Stonebrook division.

The EBSA also found that Baird issued loans to participants in amounts that exceeded the amounts allowed under the terms of the plan document. The proceeds of the participant loans were used to invest in Stonebrook. Baird also issued a $490,000 loan from the plan to a real estate company, called Burge Realty LLC, which in turn, used the proceeds of the loan to buy 10 lots in the Stonebrook development. Finally, Baird failed to attempt to collect on the participant loans or the loan to Burge Realty, resulting in large losses to the plan.

The full text of the complaint can be downloaded here.

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