How to Invest as Newlyweds

Agree on an investment purpose, time frame and risk level. (Getty Images)

As a blissful newlywed, you have no reason to know that money is the issue married couples fight about the most and the second leading cause of divorce, according to research by Dave Ramsey’s Ramsey Solutions.

The good news is they also found that having regular money conversations and planning together to set long-term financial goals is one practice separating couples in “great” marriages from those in “OK” or “in-crisis” marriages.

The best marriage advice for newlyweds, then, may be to talk openly and regularly about your finances. But talking about money is one thing; actually collaborating on financial matters, especially how to invest as a couple, is a whole other matter.

Opposites attract – for better or worse? Rare is the couple who agrees on everything. And unfortunately, marriage isn’t a cure-all for differing opinions.

You don’t just melt and merge into one the day you marry, says ShirleyAnn Robertson, a financial advisor with Prudential in Schaumberg, Illinois. Both of you will have different approaches to money and investing, and that’s OK.

In fact, opposites attracting can work to the newlywed investor’s advantage. For instance, if one spouse is more conservative than the other, his caution can bring stability to the portfolio. Meanwhile a more aggressive investor can help a cautious one reap the benefits of greater growth.

But when conservative meets aggressive it can also lead to investment anxiety, Robertson says. If one partner feels pressured into investments he’s not comfortable with, it can create stress in the relationship.

How to invest as a couple. You don’t need to take on your partner’s investment style – especially if it gives you heart palpitations – but there does need to be some financial coordination.

“Newlyweds with conflicting portfolio objectives could find themselves with a mix of assets that have no clear direction,” says Justin Sullivan, Atlanta-based investment market manager of the southeast region at PNC Wealth Management. “The best way to overcome this is for couples to discuss and document their portfolio goals.”

Agree on an investment purpose, time frame and risk level as these elements will dictate how you invest as a couple.

If you’re saving for a short-term goal, say within three years, for instance, you should focus on stable investments like short-term CDs or money market funds. If your investment goal is decades away, being more aggressive will put you in a better position to achieve those long-term goals, says Mike Lynch, Charlotte, North Carolina-based vice president of strategic markets for Hartford Funds – provided “it’s something you’re [both] comfortable with.”

Regardless of your goal, make sure you have enough cash on hand to cover near-term expenses. Otherwise, you may end up thwarting your best laid investment plans by selling early for funds, says Michael LaRiviere, a financial advisor at Essex Financial in Essex, Connecticut.

“Newlyweds might also consider aligning their investments with their moral convictions,” Sullivan adds. Socially responsible investments make it possible to build wealth without sacrificing “the ethics and beliefs of their new family.”

Use online portfolio tools to review your accounts. Once you agree on a financial goal and any investment restrictions, look at how your current portfolio aligns with those objectives. Online portfolio analysis tools are great for this. For example, Morningstar’s Portfolio Manager lets you input your investments and receive a report showing any stock or sector concentrations. It also indicates how well your current allocation aligns with your investment objective.

Many financial sites provide similar analyses for free. Just take care with the amount of account and personal information you provide unless its a trusted site.

Some assets – like retirement accounts – have to be kept in separate accounts, but that doesn’t mean you can leave them out of the conversation. Couples should take a holistic view of their investments, retirement and non-retirement alike.

You may even find one partner’s workplace plan has lower fees or better investment options, Lynch says. In which case, you could direct more of that spouse’s income toward retirement savings and reserve the other spouse’s paycheck for living expenses.

Yours, mine, ours, or all mine? With non-retirement investments you have the choice of individual or joint accounts. Merging your non-retirement accounts can make management and spotting potential pitfalls like over-concentration easier. But some couples prefer to keep accounts separate.

Individual accounts are more popular among second (or later) marriages where the partners have more assets going into the marriage. Other reasons to keep accounts separate are spendthrift concerns or if one spouse is in an industry prone to lawsuits, LaRiviere says.

For any individual accounts, consider making your new spouse the primary beneficiary – especially for retirement accounts. The IRS allows spouses to treat inherited IRA assets as their own whereas non-spouse beneficiaries must keep inherited IRAs separate and may face stricter withdrawal requirements.

You spouse should have legal authority to access your accounts in the event of death or incapacitation, Robertson says.

Have monthly money conversations. If just thinking the words death and incapacitation makes you want to bury your head in the bedcovers, this is for you: The risk of something doing you part underlines the importance of planning together.

Don’t let one partner take over all investment decisions, even if she’s more investment-savvy. Both spouses need to be engaged in the investment process – and not only because either one could end up managing them alone eventually. Remember “great” marriages involve regular money conversations. It takes two to conversate.

Robertson advocates having monthly financial conversations to make sure both parties stay on the same page. Discuss where you’re going financially and how your investments are going to get you there, she says.

If one spouse is warier of investing, these conversations could be all the more beneficial. Sometimes risk-aversion is simply due to a lack of experience, LaRiviere says. “It’s easier to ratchet up the risk than pull it back,” so he often starts newer investors with more moderate portfolios then increases the risk as their comfort level grows. Involving a conservative spouse in investing conversations may be the key to unlocking his more aggressive core.

Just start investing. “The key is getting started,” Lynch says. Whether it’s $1, $10 or $1,000, whether you’re aggressive or conservative, just start investing.

We can get hung up on the process and forget that time in the market is a bigger driver of long-term returns than how you’re invested. So put whatever you can into your investments today and fine tune the rest as a couple tomorrow.

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