Asset allocation between spouses - together vs separate

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
ER2023
Posts: 201
Joined: Mon Jun 24, 2013 10:14 am

Asset allocation between spouses - together vs separate

Post by ER2023 »

I greatly appreciated the guidance I received on this site and made some of the best decisions as a result - HUGE thank you.

And I read all the articles on this site and many of the books recommended here - and still have confusion when it comes to asset allocation between 2 401ks. I adjusted our 401k portfolios (and included what new portfolios look like). But my gut continues to tell me to have each portfolio have a mix of stocks and bonds so each one has an appropriate amount of "protection" and risk. I know an issue with this is having duplicate investments/unnecessary overlapping - but does that really outweigh one portfolio having all the stock or all the bond funds?

For example, I am well aware about market timing - but with the rising interest rates projection, 30% of our total portfolio is in a bond fund is in her 401k and his with no bonds at all. So 60% of her total portfolio "may" not perform nearly as well over the next several years because of the bond projections. Ugh.

I don't know why I'm not understanding this - any insights would be greatly appreciated.

His (balance is $258k):
30% QMA US Broad Market Index Fund
12% Small Company Stock
10% QMA INTL DEVEL Market Index

Hers (balance is $230k)
30% SSgA US Bond Index NL Series Fund C
18% SSgA Inter'l Index NL Series Fund C
almeida
Posts: 86
Joined: Sat Sep 08, 2012 4:09 pm

Re: Asset allocation between spouses - together vs separate

Post by almeida »

Duplication and overlap are fine as long as they are consistent with your assest allocation. For example, our asset allocation has 20% bonds. Both of us own Vanguards's total bond fund and the total of each of our shares adds up to 20%. Individually, her share of bonds makes up 30% of her portfolio and mine makes up about 15% of mine. Our combined asset allocation is right on the money and our individual allocations aren't far off either. Taken alone, hers would be a little conservative and mine would be a little aggressive, but they're not totally lopsided and they actually reflect our individual risk tolerances. I did this specifically for "fairness" is case we ever split up. I have a bigger chunk of the portfolio and I handle the investing, so I didn't want her to worry that her money wasn't reaching its full potential and I didn't want to stick her with a weak portfolio. If we stick together until retirement, it'll be our money, the individual shares won't matter, and hopefully our overall allocation would have done well for us. If we don't, then our individual allocations should be okay too and no one could feel cheated out of big gains or burned by big loses.
Dandy
Posts: 6701
Joined: Sun Apr 25, 2010 7:42 pm

Re: Asset allocation between spouses - together vs separate

Post by Dandy »

Having some fixed income and equities in both is a good thing if the choices are reasonable. After that you might want to look at the choices and their expense ratio's. e.g. you may have better fixed income choices like a stable value fund and your spouse might have access to low cost equity index funds. The key is the combined allocation, expense ratios and risk exposure. and also a large percentage of contributions.
ieee488
Posts: 1989
Joined: Thu Dec 10, 2009 7:57 am

Re: Asset allocation between spouses - together vs separate

Post by ieee488 »

The answer depends on what choices are available in the 401Ks.
Dell Optiplex 3020 (Win7 Pro), Dell Precision M6300 (Ubuntu Linux 12.04), Dell Precision M6300 (Win7 Pro), Dell Latitude D531 (Vista)
Rebecca_S
Posts: 172
Joined: Sat Oct 06, 2007 6:55 pm

Re: Asset allocation between spouses - together vs separate

Post by Rebecca_S »

I handle all the nitty-gritty investment decisions and rebalancing for the both of us. We have chosen to have one asset allocation that we share so that each account may only have 1-2 investments. It is not wrong to do it the other way of course.
For me, it was much easier to have a combined allocation since we both had multiple accounts. There was her 401k, his 401k, her Roth, his Roth, her SEP-IRA and their taxable account. Not all accounts had good options for all the categories and there are some assets I prefered to keep out of taxable.
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Asset allocation between spouses - together vs separate

Post by stan1 »

It seems the bonds often end up in the wife's account for some reason. Why is that? Are women more conservative? Are husbands more willing to take risk themselves while giving their wife a conservative portfolio that, in this case, is 63% bonds while the husbands account is 100% equity? Do husbands want the assumed greater gains from equities in THEIR named account?

If I was a professional woman with a good salary I would INSIST that the money in my account be managed separately with an asset allocation appropriate for my needs as well as those of the family. If the wife is handing over investing duties to the husband he now has a responsibility to look out for his, her, and the combined family interests.

Right now OP's husband and wife 401K balances are similar ($258K and $230K). It looks like both 401Ks have index choices although not clear what choices the husband has in bonds. I would continue to contribute equally to both and invest in a similar asset allocation. Rebalancing 401Ks is easy.

Marriage is a partnership of equals. I think OP is asking himself the right questions, and congratulate him for thinking of his wife's best interests as well as his and the family. There is no right or wrong answer. Do what seems right for your circumstances.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
dewey
Posts: 497
Joined: Fri Feb 24, 2012 10:42 am

Re: Asset allocation between spouses - together vs separate

Post by dewey »

We hold separate investment portfolios for several reasons. Our AA's are similar but hers is a tidge more conservative than mine. I manage our accounts and everything is at Vanguard.
“The only freedom that is of enduring importance is freedom of intelligence…” John Dewey
User avatar
ObliviousInvestor
Posts: 4212
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: Asset allocation between spouses - together vs separate

Post by ObliviousInvestor »

Unless there's a worry of separation, I don't see any compelling reason to think of each person's accounts separately.

When it comes to employer-sponsored plans though (e.g, 401(k) plans), there often is a compelling reason to look at everything as one overall portfolio. (Namely, you can often achieve lower overall costs by using the lowest-cost options in each person's plan -- so long as you end up with an overall allocation that's suitable.)
Mike Piper | Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
bayview
Posts: 2332
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: Asset allocation between spouses - together vs separate

Post by bayview »

One thing that I sometimes brood about is that if one spouse's portfolio is predominantly stocks and the other predominantly bonds, the stock spouse's tax-advantaged space is apt to grow a lot bigger than the other's space. I realize that this shouldn't matter, but it bugs me a bit. :shock:
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Asset allocation between spouses - together vs separate

Post by avalpert »

stan1 wrote:It seems the bonds often end up in the wife's account for some reason. Why is that?
In my case it is because I have access to a full range of cheap Vanguard indexes in my 401K and here 403B with TIAA-CREF has equity indexes I would rather avoid but the Traditional Account that serves as most of our fixed income and the Real Estate Fund.
BuckyBadger
Posts: 1221
Joined: Tue Nov 01, 2011 11:28 am

Re: Asset allocation between spouses - together vs separate

Post by BuckyBadger »

I'm the woman, and I'm the one who manages our investments. I treat all retirement accounts (his 401k, her 403b, his IRA, her IRA, our taxable account) as one giant bucket, and we use the most advantageous funds in each account - for the 401k/403b, of course. We have access to all vanguard funds in the other accounts. Because of what was available in his account and mine, he was originally holding all our bonds, and I was 100% TSM. After changing employers and adding more money, he's now mostly bonds and some international and I have a bit of everything, but not at all in our asset allocation ratio.

Assuming we stay together, we'll have a wonderful retirement. And the opposite possibility is not something for which we spend time preparing for - not really a "what-if" that leads to a happy marriage, but that's just in my opinion, of course.
User avatar
BL
Posts: 9874
Joined: Sun Mar 01, 2009 1:28 pm

Re: Asset allocation between spouses - together vs separate

Post by BL »

I think if there is even a small dissatisfaction with uneven distribution, they should attempt to correct this unless the cost is such that it just doesn't make sense. Also they can use Roths, I-Bonds, and taxable investing to help balance things up. The ideal way financially is choosing the best available in each account, but it may not be worth the discomfort. Do whatever is most comfortable for both.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Asset allocation between spouses - together vs separate

Post by ruralavalon »

The idea is to get the best combinaton of broad diversification (to reduce risk) and low ER (to increase net gain), given the always limited and sometimes unequal quality of fund choices in the two 401ks.

In advance its not possible to know for sure which account will perform better in the future, not knowing for sure which asset type will perform better going forward.

Try to think in terms of overall performance of the whole portfolio. If to achieve hypothetical equal performance of the two accounts you make sub-optimal fund choices in each (either losing some diversification, or increasing ERs), then you decrease the portfolio performance. Which would cause my gut to react, and perhaps yours too.
from prior thread wrote: (comments in blue added)
His 401k (52% of portfolio; $258k $239k; add $17.5k/yr; 4% company match).
30%, QMA US Broad Market Index Fund (.05%) <= but her best large cap stock option and best er = DODFX (.64%)
12%, Small Company Stock Account (0%),
10%, QMA INTL DEVEL MARKET IDX 922 (.10%)

Her 401k (48% of portfolio; $230k $218k; add $17.5k/yr; 3% company match).
30%, SSgA US Bond Index NL Series Fund C (.06%), <= but his best bond fund er = 0.23%
18%, SSgA Inter’l Index NL Series Fund C (.09%)
So trying to make the two accounts equal in their asset content would increase the overall ER of the portfolio, and accordingly decrease net gain. The decrease would compound over the years. Since you are 49 and 43, the seemingly small percentage difference would have a fairly large effect compounded over the next 20 years or so. See table at the end of this article: Vanguard, "Stopping the silent killer of returns" ; or try this calculator: buyupside.com, "Investment Fee Calculator - See How Fees Reduce Your Returns" .

Nevertheless if this is causing real tension in the family, then make the change. Family harmony is more important than trying for the best investment portfolio.

EDIT; for spelling and grammar.
Last edited by ruralavalon on Mon Jul 29, 2013 1:44 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
jlawrence01
Posts: 1908
Joined: Mon Feb 25, 2013 12:34 am
Location: Southern AZ

Re: Asset allocation between spouses - together vs separate

Post by jlawrence01 »

ieee488 wrote:The answer depends on what choices are available in the 401Ks.
Very true. We try to take advantage of the best of what is available in each of our 401(k) accounts. My wife's has a definite growth bias, mine a value bias.
Post Reply