In a household, there's usually a division of labor for things that have to get done. One person may handle the food shopping and cooking, while the other cleans and pays the bills. And one person usually takes care of investments.
In the greatest generation (World War II), it was typically the husband who handled the couple's investments. He created their investment plan and tracked it for the last several decades. Over the years, he probably didn't share all of the important information about their investments with his wife.
The problem is, given that women tend to live longer than men, they're becoming widows in their 70s and 80s and being thrust into a position where they have to make investment decisions they're not prepared to make. At the same time, the widow is grieving. Her world has been turned upside down. She might have to move from the home she has owned for many years to a smaller house or retirement community.
But decisions have to be made about her investments. A widow's needs are different than a married couple's needs. When her husband was alive, they may have been receiving two Social Security payments each month and maybe one from a pension. With the possibility of less income after her husband's death, she may have to make adjustments.
If both spouses are informed about their investments, a lot of stress and uncertainty can be lifted. The person that handles investments should sit down with their spouse and explain some basic information. Here's what the couple should talk about:
What is our investment plan? Explain your investment strategy. Talk about whether you might need to adjust or change your goals or time horizons. Make sure you both agree on your tolerance for risk and asset allocation. Find out where your income comes from every month.
Who can you trust? What happens often is you start working with an investment adviser in your 30s and as you get older, your adviser will eventually retire. When your adviser retires, usually your account will be handed over to whoever is taking his place. The advisor who inherits your account doesn't know you and won't have the same level of experience and knowledge as your original advisor about your situation.
One thing your spouse should know is the difference between a fee-based advisor and a commission-based broker. When a cold call comes from a broker trying to sell something, your spouse should be prepared to ask how that person gets paid.
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A spouse also really needs to know whose advice to trust. Retirees have become huge targets for financial predators, who sell them annuities and other products they may not need. These financial predators seem like nice people and say they have your best interest at heart, but really they're just trying to make money for themselves. Many retirees have no idea what to do or who to trust.
Know where your investment accounts are. You might have several investment accounts with various companies. Show your spouse where you keep your information and important documents about your accounts.
This is also a good time to make sure your beneficiary information or estate planning is up to date. You might not have been married when you set up your first investment account. Or if your spouse dies, you have to change the beneficiary on your investment accounts.
It's very important that you teach your spouse about your investment strategy and whom they can count on. By giving your spouse this basic information about your investments, there will be a better understanding if you get sick or when something unexpected happens to you.
Adam Bold is the founder of The Mutual Fund Store, which provides fee-only investment advice with locations coast-to-coast. He's also host of The Mutual Fund Show, a call-in radio program broadcast across the country. Bold is author of the book The Bold Truth about Investing (April 2009). Bold is Chief Investment Officer of The Mutual Fund Research Center®, an SEC-registered investment adviser which provides research and mutual fund and asset allocation recommendations to stores in The Mutual Fund Store system.