Couples Not Going Deep into Retirement Planning

Advisers can help by including spouses in retirement planning conversations.

A survey of more than 1,800 Americans in a relationship, defined as those who are married or living with a partner, found that savings inaction, failure to share financial specifics with their significant other and reliance on overly conservative investments, may be jeopardizing their chances of achieving a happily-ever-after retirement.

One in three Americans in a relationship (33%) report that neither they nor their partners are saving for retirement. Among the 36% of Americans in a relationship who report that their partner is saving for retirement, roughly one in five (23%) say they do not know how much their partner contributes to long-term retirement accounts or have even a general sense of the total value of their partner’s retirement account (21%). In addition, 21% of Americans in a relationship who are personally saving for retirement say their partner doesn’t know how much they are contributing to their long-term retirement savings.

Dayana Yochim, investing specialist for San Francisco-based NerdWallet who works in Alexandria, Virginia, says, “One of the big reasons couples don’t discuss retirement savings is it’s a distant, fuzzy target. It gets pushed to the back burner behind more immediate needs and goals. While it’s natural to focus on these, it is important to know the state of the financial union.”

Yochim tells PLANSPONSOR there are advantages to being part of a couple, and by not talking about retirement savings, they could be leaving money on the table and shortchanging their future together. “They should be working together to maximize every dollar in the household. Togetherness is very powerful,” she says.

NEXT: Using the right savings vehicle makes a difference

The survey found lack of communication also plagues those who are saving and use accounts with brokerage firms to save for retirement, with 43% of respondents stating that they do not consult with their partner about trading decisions regarding their brokerage account.

Yochim explains, “Often we see one person more engaged in the logistics of saving for retirement. That’s fine if that’s the person’s strong suit and what they bring to the relationship. But they should keep their partner informed. What if that person dies or becomes incapacitated and is unable to do those duties anymore? If their partner is in the dark, he or she won’t know what to do.”

Thirty-nine percent of Americans in a relationship who are saving for retirement use a workplace retirement savings plan, such as a 401(k) or 403(b). However, the second most common account Americans in a relationship use for their long-term investments is a bank savings account (31%), despite the fact that these accounts typically pay minimal interest.

NerdWallet explains that the financial advantages of investing money earmarked for retirement in an account designed for that purpose are clear: In 30 years, a couple that saves $5,000 a year in a Roth IRA earning a 5% average annual return will have approximately $332,000 in savings—$180,000 more than if they let their money languish in a bank savings account earning 0.1% interest.

Yochim says plan sponsors and advisers can help with general education about which accounts are best for saving for retirement.

NEXT: What plan sponsors and advisers can do to get the calculations started

Three out of four (76%) survey respondents in a relationship, where at least one partner is saving for retirement, say they’ve discussed general retirement planning issues such as at what age they want to retire, where they want to live and what they want to do. But the conversation seems to trail off when it comes to calculating the specifics. Thirty percent of survey respondents in a relationship who report at least one partner is saving for retirement say they do not talk to their significant other about how much money they will need to retire.

Again, Yochim says, education is key to help couples start crunching the numbers. General education should help employees prioritize all financial demands and provide basic rules for finances, such as paying off high-interest debt, having an emergency fund and balancing college savings and retirement. Plan sponsors and advisers can also utilize available resources, such as calculators and planning tools, to help couples see how to create a plan for their financial future.

Yochim suggests plan sponsors or advisers host a financial health day and invite employees’ partners to discuss retirement goals and their savings plan.

“When partners are on the same page and excited, it is a lot easier to get them talking together. Being able to include other members of the household in these decisions and give them a checkup about the state of their financial union will help get conversations started and help couples improve their future financial situation,” she concludes.

Findings of the survey can be found here.