How accurately can you guess your partner’s income? According to Fidelity Investments’ 2015 Couples Retirement Study, while 72 percent of couples claim they communicate exceptionally or very well about financial matters, over 43 percent (up from 27 percent in 2013) cannot correctly identify their partner’s earnings. Of these, 10 percent are off by $25,000 or more. This raises concerns: if many couples can’t get this basic financial detail right, what other disconnects might be unknowingly undermining their financial stability?
The biennial survey, which has been conducted since 2007 and is unique in testing agreement between married partners and those in long-term committed relationships on communication and knowledge of finances and retirement planning issues, identified a number of other critical misunderstandings and knowledge gaps. Such as:
- 36 percent of couples disagreed on the amount of the household’s investible assets.
- When asked how much they will need to save to maintain their current lifestyle in retirement, nearly half (48 percent) have “no idea”—and 47 percent are in disagreement about the amount needed. This level of disagreement is highest among those who are closest to retirement—Baby Boomers (born 1946-64).
- 60 percent of couples and almost half (49 percent) of Boomers don’t have any idea how much their Social Security benefit might be, even though the information is readily available on the Social Security website.
- Couples aren’t on the same page when it comes to describing their expected lifestyle in retirement—with one in three disagreeing about how comfortable that lifestyle will be.
“We know couples don’t always agree when it comes to money, but we were surprised how many missed the mark on the question of their partner’s salary,” said John Sweeney, executive vice president of Retirement and Investing Strategies at Fidelity. “If gaps exist around basic questions like salary, couples might have other opportunities for improvement on the financial front, such as sorting through and tackling important issues together around the next big milestones in their lives, how and where to spend retirement and later-in-life issues involving eldercare and estate planning. By taking time to engage in conversation and plan, your chances of creating a strong foundation and achieving your goals are greatly enhanced.”
American Couples Worrying More, Planning Less A strengthening economy is apparently not enough to ease anxiety about rising costs in the future. In fact, nearly three-quarters (74 percent) say they worry about being able to afford unexpected health care costs in retirement, up from 70 percent in 2013. More than half (51 percent) worry about outliving their savings in retirement, a number that is significantly higher than what was reported in 2013 (42 percent).
Despite these concerns, only 21 percent have developed a retirement plan to ensure they do not outlive their savings and the number putting off planning is on the rise, with 36 percent indicating they haven’t even thought about doing so yet (up from 28 percent in 2013). In addition, despite the fact it’s the top concern, 37 percent have yet to consider the impact of potential health care costs on their savings in retirement (up from 30 percent in 2013). For younger investors, only 11 percent of Generation X (born 1965-1978) have developed a plan, although some will be approaching retirement in 10-15 years. This lack of cooperative planning between couples may be a major contributor to a general lack of knowledge and heightened anxiety around retirement, according to Sweeney.
The good news: the results strongly suggest planning for the future can go a long way toward achieving greater peace of mind and alignment as a couple.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
