Finding middle ground with spouse on investing

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petiejoe
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Finding middle ground with spouse on investing

Post by petiejoe » Fri Aug 12, 2016 6:52 pm

Emergency funds: 3 months expenses with no changes, 6+ months expenses if we tightened our belt and stopped saving (e.g. if we had an emergency)
Debt: No debt (paid off house, paid off car, pay off credit cards in full every month)
Tax Filing Status: Married Filing Jointly
Tax Rate: no state income tax, 28% federal bracket, but might be higher if this year's stock grants stay at their current level.
State of Residence: Washington
Age: 30 (both of us)
Desired Asset allocation: 90% stock/10% bond (but see discussion)
Desired International allocation: on the fence on this one - I've read plenty of articles about the pros and cons of international allocation and I'm not sure I care enough to make any special effort to purchase international beyond what's in the vanguard target retirement funds

When we got married, we made a conscious decision to fully join all our finances. I don't think either of us regret that in the slightest. Over time, I feel we've generally become in sync on debt and we're gradually becoming in sync on spending, but I don't think we're in the same place on investing. I'd appreciate any insight into finding a middle ground on this topic.

The last time we liquidated stock from stock grants, we put it all in vanguard's total stock market fund and shifted the 401k funds to a different target retirement fund to maintain a roughly 90/10 asset allocation. We're looking at liquidating another batch (the ones we've earned since the last liquidation) and my spouse is resisting putting it in the market because of a general lack of trust in the system. I understand where my spouse is coming from, but I don't know anything better. I don't feel like it's just a question of amount in stocks vs bonds because discussions of changing asset allocation doesn't seem to resolve the concern. However, leaving it all in a savings account makes me nervous because of loss due to inflation (and a general sense of not getting anywhere)..

If we knew of any way to legitimately make our money work for us without the gambling feeling of the stock market, I think we would totally sign up for it. We've discussed rentals and we agree with it in principle, but I'm not particularly handy and get frustrated with home ownership responsibilities (e.g. dealing with things breaking) in my own home, so I think purchasing rentals would be a very stressful and undesirable mechanism for us. I don't know of anything else, though, and I'm extremely skeptical of "money making opportunities" (which is part of why I like the boglehead philosophy).

We do eventually want to buy land and build a house to retire in (in an exurban area we both love but isn't practical to live in while I work in the city), so it's very tempting to just use the money and accelerate that long-term goal. However, I feel like that's just kicking the can down the road and right now it's very much a seller's market so I don't want to rush into a purchase when I know I don't have to.

If it were just me, I would have already moved the money into the stock market and moved on with my financial plan (which does indeed say to sell company stock and put it into the stock market), but I'm not going to do that without my spouse being fully on board. So here's the question - Does anybody have any recommendations for how to either show my spouse that it's not just "rich people gambling," or find a middle ground that gives acceptable returns for a very long saving timeframe?

livesoft
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Re: Finding middle ground with spouse on investing

Post by livesoft » Fri Aug 12, 2016 7:02 pm

Maybe switch asset allocation to 80/20 and put the 10% into CDs instead of a bond fund. Or use short-term bond fund.
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radiowave
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Re: Finding middle ground with spouse on investing

Post by radiowave » Fri Aug 12, 2016 7:05 pm

OP, you may get a better response if you follow the boards format: viewtopic.php?f=1&t=6212

I'm having difficult following what you have and where (401k, taxable count, etc.). I you could lay that out using the format above, you'll probably get some better responses to your post.
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delamer
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Re: Finding middle ground with spouse on investing

Post by delamer » Fri Aug 12, 2016 7:05 pm

What do you mean by "a general lack of trust in the system" and "rich people gambling?"

It may be that there are ways to counter those arguments or invest to offset their effect that would make your wife more comfortable.

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Re: Finding middle ground with spouse on investing

Post by Jack FFR1846 » Fri Aug 12, 2016 7:09 pm

Put the extra money into more conservative, safe places:

CD
iBonds
Bond Fund
high yield savings account
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arcticpineapplecorp.
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Re: Finding middle ground with spouse on investing

Post by arcticpineapplecorp. » Fri Aug 12, 2016 8:47 pm

What do you consider "acceptable returns"? I mean the return is what it is. You get higher return from stocks (generally) than bonds because stocks are riskier than bonds. You want return (requires risk) and she wants safety (means less return). How about splitting the difference (50/50) half stocks/half bonds? That truly is the "middle ground" you are seeking (literally). Now the question is what returns will you get doing that? Well if stocks return 7% per year over the next decade (some have said that including Mr. Bogle) and bonds are paying 2% per year over the same time, your return would be:
(.07 X .50) + (.02 X .50) = 4.5% per year over the next decade (if all stars align). Is that "reasonable"? It is what it is. By reasonable I think you mean "acceptable". Well can you accept 4.5% per year? If not, then you need to take more risk to get a higher return. No way around that, other than investing more money or increasing your investing time horizon. Investing = money invested X time invested X rate of return (level of risk). If you reduce your return because you don't want risk, you may have to make it up with more money and/or more time money is invested.

I would avoid real estate if I were you based on the comments you made.

You could put money in cash (CDs were mentioned) but you're right that the biggest concern is long term risk (that is, inflation) rather than short term risk (that is market volatility). It's hard to understand the erosion of one's purchasing power through deflated dollars over time until either you've been spending for a couple of decades and understand the loss of purchasing power or have lived through a short term high inflationary time (like the late 70s/early 80s).

So now that we've covered stocks, bonds, real estate and cash what does that leave? Commodities, alternative investments, etc. Now those things are gambling. Investing in the total stock and bond market (and some real estate thrown in there) is not gambling because you're profiting from the economy of the planet.
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celia
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Re: Finding middle ground with spouse on investing

Post by celia » Fri Aug 12, 2016 9:15 pm

I'm with your spouse in saying that your current investments already have enough market risk. You don't need more. I seem to also recall that there was a study that said a 90/10 portfolio had pretty much the same growth as a 80/20 but the 80/20 had less risk.

If you left the investing decisions to your spouse, what would he/she change? Where would new money go? I think there is an advantage in taking another person's views into account. I think CDs or a new bond fund are completely appropriate in your situation.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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petiejoe
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Re: Finding middle ground with spouse on investing

Post by petiejoe » Fri Aug 12, 2016 11:17 pm

radiowave wrote:OP, you may get a better response if you follow the boards format.
I filled out the top of that template, but didn't think the rest of it made much difference for the discussion at hand. I can sit down and fill that out later if people think it actually makes a difference.
celia wrote:I'm with your spouse in saying that your current investments already have enough market risk. You don't need more.
Sorry, I should have been more clear about what I was specifically suggesting. I'm not planning on putting it all in stock and none of it in bond, I was planning on splitting it up to the same asset allocation as before (by buying TSM in my taxable account and shifting my retirement accounts more toward bonds). However, my spouse doesn't distinguish between stocks and bonds. I've offered to explain the difference and suggested more reading material (because my spouse is a big reader), but this is overwhelming to them.
celia wrote:If you left the investing decisions to your spouse, what would he/she change? Where would new money go? I think there is an advantage in taking another person's views into account. I think CDs or a new bond fund are completely appropriate in your situation.
I totally agree. However, they would put it 100% in a savings account. Since we're still young (in our 30s), I'm very concerned about the effects of inflation over the long term if we leave it there.
arcticpineapplecorp. wrote:What do you consider "acceptable returns"?
I think the most important thing to me is (a reasonable chance of) beating inflation. I'm not trying to chase anything crazy and if 3.5%-4.5% was the real return I'd personally be willing to call that a good middle ground.
arcticpineapplecorp. wrote:Investing in the total stock and bond market (and some real estate thrown in there) is not gambling because you're profiting from the economy of the planet.
I totally agree, but I'm trying to figure out how to bring my spouse to that way of thinking (or adjust to something that works for us both).
delamer wrote:What do you mean by "a general lack of trust in the system" and "rich people gambling?"
My spouse really only trusts guaranteed return published by the bank as an APY backed by the FDIC. They don't really distinguish between stocks and bonds because both have a chance of defaulting and losing capital.
livesoft wrote:Maybe switch asset allocation to 80/20 and put the 10% into CDs instead of a bond fund. Or use short-term bond fund.
I've offered changing asset allocation several times, but that doesn't really get much response. The money still feels fake to them because it's not in a savings account. However, it might be a good idea to do this anyway acting as a proxy for the underlying worry of volatility.

I talked with my spouse again with these suggestions in mind. They said it was okay to put it in our taxable account, but it felt kind of like they were just giving up on it. I'll continue to try to educate as gently as I can without being overbearing, but I do worry that this will be my fault if things don't end up well.

Thanks for all your good suggestions. I'll be selling the company stock on Monday. My IPS requires 6 months between planning a change and executing on it, so I'll wait until early next year to shift to 80/20.

traveltoomuch
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Re: Finding middle ground with spouse on investing

Post by traveltoomuch » Fri Aug 12, 2016 11:52 pm

petiejoe wrote: I filled out the top of that template, but didn't think the rest of it made much difference for the discussion at hand. I can sit down and fill that out later if people think it actually makes a difference.
I don't think it would add much. This most recent post adds significant clarity.
petiejoe wrote:However, my spouse doesn't distinguish between stocks and bonds. I've offered to explain the difference and suggested more reading material (because my spouse is a big reader), but this is overwhelming to them.
It sounds like you're on the right path here. Unless you're going to retreat from the combined finances decision and each manage your own investments, you'll need to come to some common understanding re: risk. That could feed into (or from) a discussion on long-term investment goals. And some of those discussions can be fraught.

I like the idea of throwing reading material at a spouse who likes to read. Maybe Bernstein's "If You Can" paper. Maybe a hardcopy of the Boglehead's Guide to Retirement Planning. Or anything that does a good job of explaining inflation risk.

Keep in mind that this conversation could be an ongoing process. It may also step on tender toes, bringing up baggage left from parents etc. Be patient.

jackholloway
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Re: Finding middle ground with spouse on investing

Post by jackholloway » Sat Aug 13, 2016 12:03 am

Ok, I will bite.

Your spouse is not entirely wrong. They may not match your desired risk profile, but being a bit concerned about rate risk is not irrational.

If you put your money in vanguard's total bond, with a 7-ish year duration and a sub-2% return, then rates go up 3% next year, you have a 21-ish percent loss until the higher rates make up for it. If you buy a bank CD, on the other hand, you get most of that return, but with no chance of loss, because you can break the CD with an interest penalty.

One possible compromise is ibonds and tips bought at auction. Treasury ibonds currentlily beat inflation by 0.1%, and can be cashed out at any time. The ten year tips is currently beating inflation and backed by the treasury. I currently do not own any tips, but I do have 40k in ibonds, and 20k more set aside to buy this year's allotment. Give it a decade, and at 20k a year, it adds up.

Bond risk is far less than stock risk, but it still exists.

bene1
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Re: Finding middle ground with spouse on investing

Post by bene1 » Sat Aug 13, 2016 11:47 am

I hear you OP. It can be tough to get on the same page. I'm about your age and my experience has some similarities. With my spouse, I gave up on the "gentle education" part and went more direct. Your mileage may vary.

I wanted to get serious about retirement saving and found this forum. I dove in and spent considerable time learning the Boglehead way. While I was developing my personal Investment Policy Statement and getting my own ducks in a row, I shared what I was learning and sprinkled investing factoids into conversation over several months. It didn't go anywhere with my wife...

It sounds silly, but eventually, once I felt confident in my own knowledge and plan (3 Fund Portfolio), I requested a meeting with my wife. Said something like "Sometime when you're free in the next few days, I'd like to talk about investing for an hour or so." I tried to give her some control rather than launching into a lecture at the dinner table. Then, at our meeting, I shared a PowerPoint slide show I had prepared! :shock:

I kept it light and had stupid graphics I found on the internet, like an inflation monster eating a piggy bank. We laughed together and she was a good sport while I laid out the basics: stocks, bonds, index funds, tax-advantaged accounts, asset allocation, and the Boglehead philosophy.

After our meeting, my spouse didn't really change much as far as investing interest, but now the topic is open for discussion rather than being an annoyance. Once she understood that I had some level of knowledge and a plan, she could get onboard with the concept. I welcome her input too, BTW. Once again, your mileage may vary. :D

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celia
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Re: Finding middle ground with spouse on investing

Post by celia » Sat Aug 13, 2016 12:31 pm

petiejoe wrote:My spouse really only trusts guaranteed return published by the bank as an APY backed by the FDIC. They don't really distinguish between stocks and bonds because both have a chance of defaulting and losing capital.

...The money still feels fake to them because it's not in a savings account.

...They said it was okay to put it in our taxable account, but it felt kind of like they were just giving up on it.
I think the real problem is that you are trying to coordinate with too many people. You can't please everyone when the group is too large.

BTY, How many spouses do you have? :D
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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celia
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Re: Finding middle ground with spouse on investing

Post by celia » Sat Aug 13, 2016 1:21 pm

Here is how DH began to understand what I was doing in investing:

I/we? have been keeping a list of all our assets (and liabilities) in a spreadsheet for 20-30 years. (Before Excel was invented, I did it on paper!) I add a new column each year to update the account values at the end of the year. The original motivation was to see if we were making progress or not, especially in years we have a large purchase, such as a car or air conditioning. (I also add another column each year to show how much money was added or withdrawn from each account (except checking). This is needed since when we see an account grow significantly, we need to know if it was because of the investment itself or did we add new money to the account or convert into it. This makes it easy to see Roth conversions when $10,000 is withdrawn from a tIRA while a Roth shows that much being added.)

Nowadays, we only review it after it is updated each year or we need to make a major purchase and figure out where to take the money from. It is nice that it summaries our financial life on one piece of paper, which DH originally requested. It also helps for estate planning and if I should die. (I am now confident DH will draw down the assets correctly, if needed.)

The tax-deferred accounts are grouped together and separated from the taxables by some space. They are labeled: "TAX-DEFERRED--These accounts will be fully taxed when withdrawn." The Roths are also grouped and separated from the tax-deferred and labeled: "ROTHS--These accounts are tax-free and should be withdrawn last."

OP, I suggest you make such a list for yourself and show your spouse(s) how your financial situation has changed since last Dec. 31. If you can easily go back an additional year or two, that would also help. When showing it, present it with the idea it can be proved. Try to add in any suggestions your spouse may have to make it clearer to him/her.

I think that the spreadsheet will be a good tool in getting a reluctant spouse interested or coming to overall agreements with a spouse who sees things differently.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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petiejoe
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Re: Finding middle ground with spouse on investing

Post by petiejoe » Sat Aug 13, 2016 3:00 pm

celia wrote:BTY, How many spouses do you have? :D
English really needs a gender-neutral singular pronoun :P . I'll try to keep things in terms of "we" or "I," which helps grammatically and keeps things more positive (albeit a tad more selfish).
celia wrote:I/we? have been keeping a list of all our assets (and liabilities) in a spreadsheet for 20-30 years. (Before Excel was invented, I did it on paper!) I add a new column each year to update the account values at the end of the year.
We've definitely had struggles in the past getting on the same page with how we spend money, but we've come a long way there. I think the turning point was when I realized and explained that a solid budget makes it easier for me to spend money on non-essentials because I know that everything will be okay even if we spend a chunk of money on something fun. This turned it from trying to control the spending into trying to free up the spending. We use mint to review the budget every month and a spreadsheet to help keep track of which budget surpluses go into which accounts. Sometimes we disagree about which budget a particular purchase goes in, but we've learned ways to find middle ground on those kinds of discussions. Each year at the beginning of the year we reevaluate the budget and the only rule I'm not willing to compromise on is that we budget to earn more than we spend. One of us has seasonally variable hours, so we set the budget to stay within the steady paycheck and have clear rules about how any overages (mostly from the seasonal work) get put into a saving or a fun account.

The savings account grows fairly steadily and I could probably suggest that we automatically move that into investment accounts (stocks+bonds according to our asset allocation). However, with company stock grants vesting every 6 months (with widely ranging values), we have irregular periods that spark the conversation around how we should handle longer-term investment of large sums of money.
jackholloway wrote:Your spouse is not entirely wrong. They may not match your desired risk profile, but being a bit concerned about rate risk is not irrational.
Perhaps part of my problem is that while I'm convinced that the boglehead philosophy is the best plan available for building financial independence, I also know that there are events that could wipe out any stock/bond asset allocation. I can't promise that the principal is secure. I'm personally okay with the statistical probabilities that things will work in our advantage, but that's still a hard sell to someone who's not convinced.
traveltoomuch wrote:I like the idea of throwing reading material at a spouse who likes to read. Maybe Bernstein's "If You Can" paper. Maybe a hardcopy of the Boglehead's Guide to Retirement Planning. Or anything that does a good job of explaining inflation risk.
I loved that "If You Can" paper - I thought it was a very good succinct explanation of what I'm trying to do. I did share it as soon as I read it. I think that's one of the reasons we were able to do the large transfer during the last stock liquidation. Maybe one thing I could do is pull it up and read it together every time we have a big transfer coming due :) . I'll look at other threads for more reading suggestions, but if anybody has any other good suggestions for reading material that would work well in our situation, I'm glad for the input.
bene1 wrote:Then, at our meeting, I shared a PowerPoint slide show I had prepared!
I like it. However, I think I'd rather find a video or powerpoint presentation made by somebody else, because I'm afraid that I'd come off as being too preachy if I gave my own formal presentation on the subject.

Thanks again everyone. I'm feeling better about this already.

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Re: Finding middle ground with spouse on investing

Post by celia » Sat Aug 13, 2016 3:09 pm

petiejoe wrote: I'll look at other threads for more reading suggestions, but if anybody has any other good suggestions for reading material that would work well in our situation, I'm glad for the input.
Why not share this thread and any others that strike you as interesting (real people talking about real financial/investing problems)? Be on the lookout for threads that present opposing points of view.
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Re: Finding middle ground with spouse on investing

Post by Nearly A Moose » Sat Aug 13, 2016 3:15 pm

Putting everything in a savings account because of a lack of trust in the system (which I don't really understand) and a 90/10 AA are pretty far off. I'd be terrified, though, if I had a large amount of cash sitting indefinitely in savings at your/my stage of life. Each additional year of compounding in the market adds pripritionately huge returns.

I don't really understand what you/spouse mean by situations that could completely wipe out the value of stocks. That has literally never happened in a developed stock market if you've bought the market. (And if it did, we'd have much bigger problems that planning comfortable retirements.) Have you tried explaining what it really means to own a total stock mutual fund? Individual stocks can get wiped out, but if you but total market, you're essentially buying a small percentage of the US economy. If spouse thinks the US economy will be here in 30 years, it's as "safe" as a bank account long term.
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Re: Finding middle ground with spouse on investing

Post by White Coat Investor » Sun Aug 14, 2016 10:24 am

delamer wrote:What do you mean by "a general lack of trust in the system" and "rich people gambling?"

It may be that there are ways to counter those arguments or invest to offset their effect that would make your wife more comfortable.
Sounds like more education might be in order. Successful investors view stock market investing as buying profitable companies a tiny piece at a time. Over the long run, your return is that of the companies. If Apple and Exxon and Google make money, then you do too. Seems reasonable, right? See how much easier that is when you forget about the short-term speculative component which zeros out increasingly over time?
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Re: Finding middle ground with spouse on investing

Post by nedsaid » Sun Aug 14, 2016 10:49 am

White Coat Investor wrote:
delamer wrote:What do you mean by "a general lack of trust in the system" and "rich people gambling?"

It may be that there are ways to counter those arguments or invest to offset their effect that would make your wife more comfortable.
Sounds like more education might be in order. Successful investors view stock market investing as buying profitable companies a tiny piece at a time. Over the long run, your return is that of the companies. If Apple and Exxon and Google make money, then you do too. Seems reasonable, right? See how much easier that is when you forget about the short-term speculative component which zeros out increasingly over time?
Owning stocks is a proxy for owning your own business. Owning REITs is a proxy for being a residential and/or commercial landlord. Owning bonds is a proxy for being a lender. Investing is a way of participating in the economy with many fewer headaches and problems. My REIT investments have never called me at 3 a.m. over a plugged toilet.

People get hung up on volatility because their time horizons are not long enough. In the short run, almost anything can happen. Over the long run, your investments will reflect their true economic value. A great example is your own home, which can fluctuate by thousands of dollars a day, perhaps depending on your neighbor's schedule or lack of schedule for lawn and landscaping maintenance. But we don't think about it since our homes don't trade on an exchange, you don't see 123 Main Street on the ticker.
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Re: Finding middle ground with spouse on investing

Post by Kenkat » Sun Aug 14, 2016 10:58 am

It wouldn't be the worst thing in the world if you took that next stock grant and split it 50/50, with 50% going into the market and 50% going into something safe like a bank account, I-bonds, etc. I know that causes havoc with your targeted 90/10 allocation, but you might need to back off on something so aggressive for your spouse's benefit and try carve off some cash savings to allow them to feel ok about everything as well. It is ok to try to convince them otherwise, but you might get to a point where a compromise is necessary on both of your parts.

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Re: Finding middle ground with spouse on investing

Post by selters » Sun Aug 14, 2016 8:24 pm

It is certainly in line with the Bogleheads® investment philosophy to use cash in a savings account instead of bonds in the fixed income part of a portfolio. You can do that, too.

The idea that 90/10 ought to be the baseline asset allocation for the 30 year old investor is a very recent one. Historically that has been considered very aggressive. Age in bonds or a static 60/40 allocation have been more common. Peter Bernstein's 2002 article "The 60/40 Solution" is often mentioned here at the Bogleheads forum by people who recommend a more conservative asset allocation than 90/10. LINK to Mr. Peter Bernstein's article: "The 60/40 Solution." I have copied the link from one of Taylor Larimore's posts.

We Bogleheads like to focus on the minutiae of asset allocation or expense ratios, but really, savings rate is a lot more important, especially early in the accumulation phase. viewtopic.php?t=146844 is one thread about just that, which is probably not the only one or even the best one from the Bogleheads forum.

It is not unreasonable to expect a significant bear market in the next decade, the bottom of which may or may not be lower than today's index levels. If your spouse is not comfortable with stock market risk, I do not think that is big problem at all. You will do just fine with a 60/40 or even a 50/50 asset allocation.
Last edited by selters on Sun Aug 14, 2016 8:51 pm, edited 2 times in total.

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Re: Finding middle ground with spouse on investing

Post by BolderBoy » Sun Aug 14, 2016 8:37 pm

petiejoe wrote:I think the most important thing to me is (a reasonable chance of) beating inflation.
A 30/70 asset allocation will likely do that (long term) and I can tell you from personal experience that a 40/60 will do it. You've commented about the "beating inflation" a couple of times.

Would a 35/65 AA be the middle ground that keeps your wife happier?
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Re: Finding middle ground with spouse on investing

Post by MossySF » Sun Aug 14, 2016 9:32 pm

Easiest way ... perhaps not to convince a spouse ... but at least bring them grudgingly over to hold some stock ... is to lay out the alternatives.

You CAN save up for retirement using only FDIC insured CDs. I've seen it done many times amongst family and friends. You just have to live like a newly-arrived immigrant saving 50%+ of your income. Build a spreadsheet with 3% CDs and 2% inflation. The numbers work out as you bump up the savings rates. They even work out if you just put cash into a safe deposit box at about a 80% savings rate.

If your spouse is willing to forego much of today's pleasures, you can take the guaranteed route for a conservative retirement. Otherwise, you have to take some risk.

Again, build a spreadsheet to figure out what level of stock holdings you both are willing to live with.
Last edited by MossySF on Sun Aug 14, 2016 9:33 pm, edited 1 time in total.

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Re: Finding middle ground with spouse on investing

Post by bluejello » Sun Aug 14, 2016 9:32 pm

Hi OP,

My husband and I also had MAJOR disagreements over investing. The details of our arguments were different from yours, but one of our fundamental differences was also about risk (e.g. he wanted high risk / high return options, I preferred "safer" options).

It's been about 5 years since we started discussing this topic, and in that time it's gone from knockdown, screaming fights e.g. "how could you possibly be so unreasonable" to a place of mutual understanding and alignment on how to manage our investments. Here's a few things I learned from that experience:

1) Do not be didactic. Showing my husband research, giving him books to read, and all other efforts to "educate" him to my point of view had no effect except to make him feel like I was being condescending.

2) Acknowledge that your spouse is an intelligent person with a valid point of view. This can be excruciatingly difficult, since all you can think is "but a savings account won't even keep up with inflation!". And you are right, it won't. But fundamentally, your spouse's desire for safety is valid. Their belief that stocks and bonds may lose money is valid too. And at the same time, your desire to keep up with inflation is also valid. The more you two can acknowledge the truth of each other's values, the less you will feel like opponents and the more you can be collaborators in finding a "middle ground".

3) "Middle ground" does not mean halfway between your point of view and his/hers. If you want a 90/10 allocation and your spouse wants 100% in a savings account, there are many possible options besides a 50/50. For example: maybe you agree to keep $X in a savings account (where $X is a large enough number to make your spouse feel secure), and anything beyond that goes into an investment portfolio. Or maybe you buy rental properties for income but your spouse does all the management work since you don't want to deal with it. I recommend reading up on negotiating on interests vs. positions: http://web.mit.edu/negotiation/www/NBivsp.html

4) Take this as an opportunity to better understand each other and grow closer together. When my husband and I just talked about our positions on investing, the conversation turned into a fight. But when we started talking about WHY we each felt the way we did, it turned into a really great conversation about our childhood experiences with money, how finances were handled in each of our families of origin, and what we each hoped money would be able to do for us in life.

5) Time and performance smooths out preferences. As time goes on, your spouse may become more comfortable with the volatility in the stock / bond market as he or she realizes that downturns don't necessarily lead to financial disaster. You may also come to realize the benefit of having a less aggressive allocation than you originally wanted.

Good luck!

pingo
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Re: Finding middle ground with spouse on investing

Post by pingo » Mon Aug 15, 2016 12:20 am

Sometimes asset allocation chooses us. The realities of investing frequently require a negotiation between the portfolio we desire and our circumstances. John Bogle advises that successful investing requires doing just a few things right and avoiding serious mistakes.
petiejoe wrote:discussions of changing asset allocation doesn't seem to resolve the concern.
Well, there's changing asset allocation and then there's changing asset allocation. If you can manage to NOT sell your current stock/bond holdings (with the exception of stock grants), I'd say that's a valid way to stay the course.

John Bogle's version of "staying the course" isn't so different. It involves changing asset allocation, in fact. He invests in stocks and bonds and then lets them do what they will. He's not a fan of rebalancing as generally espoused here. He does course-correct when market valuations are severely out of whack or when asset proportions shift well beyond his risk tolerance. Obviously, inactivity is preferred over tinkering.
petiejoe wrote:leaving it all in a savings account makes me nervous because of loss due to inflation (and a general sense of not getting anywhere)

It sounds like each is (un)willing to accept different forms of risk. Your spouse's gut-check is as important as yours.

Forget about extra savings and stock grant liquidations for a moment: can your spouse live with contributing all new tax-advantaged retirement savings to the 90/10 target funds, as currently constituted? (e.g. 401ks, IRAs) My guess is yes. Most 30 year olds can be okay in retirement if they max and invest all available tax-advantaged accounts. Assuming this is the case, will it matter so much if the rest is cash? Again, Bogle: successful investing requires doing just a few things right and avoiding serious mistakes. You may have to be more conservative that you'd hoped, but there are worse things in life than having enough.

Focus on the cake (what you're doing right), not the icing (squeezing out extra returns). And if spouse can live with keeping retirement accounts invested by viewing them as icing on the cake, perhaps you can live with excess cash by viewing it as icing. Here, one man's icing is another man's cake, but you can still do far worse than saving all that money.
Last edited by pingo on Mon Aug 15, 2016 10:57 am, edited 1 time in total.

ryman554
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Re: Finding middle ground with spouse on investing

Post by ryman554 » Mon Aug 15, 2016 8:34 am

petiejoe wrote:
arcticpineapplecorp. wrote:What do you consider "acceptable returns"?
I think the most important thing to me is (a reasonable chance of) beating inflation. I'm not trying to chase anything crazy and if 3.5%-4.5% was the real return I'd personally be willing to call that a good middle ground.
I'm a little late here, but I want to bring this out.

I'm hoping you mean "real" as "real, after inflation". Actually, I'm not hoping this because:

bonds (short-intermediate) are close to 0% real.
stocks are close to 4% real.

Fudge the numbers a bit by a couple of percentage points -- but the point is, if you are wanting a 4% real return, you are looking at being rather heavy in your equity exposure -- which is something your SO (english singular gender neutral pronoun in this case = "the SO") is resisting.

The battle between growth and principal security is always a battle.

--Ryan

magneto
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Re: Finding middle ground with spouse on investing

Post by magneto » Mon Aug 15, 2016 10:48 am

bluejello makes very good sense above.

Just wondering how your spouse(s) feels about Rental Residential Real Estate?
Some exposure to RRRE would seem to tie in well with the longer-term goals for that Asset Class?

My wife is very keen on the tangiblity of RE, and has proven an excellent managing landlord.
She remains dubious about the "unearned" nature of Stock returns.

If only valuations for RE, Bonds, or even Stocks were more encouraging/reasonable!
Losses in all these Assets are quite possible going forward, and might realise your spouse(s)' worst fears.
Once burnt, etc! - "Never talk to me again about Volatile/Risk Assets as Investments!"
With present valuations, some Cash would seem prudent to avoid such recriminations, while not eschewing Risk Assets totally,

Good Luck
'There is a tide in the affairs of men ...', Brutus (Market Timer)

Chadnudj
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Re: Finding middle ground with spouse on investing

Post by Chadnudj » Mon Aug 15, 2016 11:00 am

Why not a CD ladder, where you agree all proceeds (i.e. the interest returned on the CD ladder) gets funneled into taxable investment accounts, with the initial principle going back to the top of the ladder?

The CD ladder (particularly if "laddered" out far enough) would get you some return that'd likely be more than a savings account, but keep the money accessible (which would seem to satisfy your spouse).

You would get the interest to invest into taxable, satisfying you, while the principle would remain in the CD ladder.

Now, the disadvantage to this plan is that, really, I'd only do this for 1 or 2 years of your exercised stock -- at a certain point, you'd be too "cash heavy" (or CD heavy, as the case may be). But maybe that's what your spouse wants -- a little more liquidity/cash in your asset allocation. That's certainly not irrational, given your 90-10 allocation elsewhere. And while you have 6 months of emergency funds, maybe your spouse would be more comfortable with more like 1 year or even 2 years -- again, that's pretty conservative, but not irrationally so.

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Tyler9000
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Re: Finding middle ground with spouse on investing

Post by Tyler9000 » Mon Aug 15, 2016 11:31 am

It sounds to me like your spouse simply hasn't bought into your investing strategy. It's not even so much about AA but about expectations. Rather than switching to a hard sell, why not step back and discuss what it means to invest different ways?

Sit down together and browse the historical performance of a bunch of different portfolios like the ones here: https://portfoliocharts.com/portfolios/ Ignore the asset allocation at first, and simply discuss the best and worst case scenarios for each portfolio. Will this particular range of returns meet our needs? How did this investment strategy weather hard times? Will we both be ok with the potential downside of this choice, or is another one better for us?

Not every portfolio is equally uncertain, so perhaps seeing the full range of outcomes side by side may help you and your spouse better understand the risks and rewards and come to a happy mutual decision.

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Meg77
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Re: Finding middle ground with spouse on investing

Post by Meg77 » Mon Aug 15, 2016 11:36 am

Just want to chime in and say that your SO's risk meter may be dinging because of the relatively low cash/emergency fund level you appear to have. I know you have a paid off house, which is great, but that means that 3 months of expenses is probably a pretty low figure. I bet you'll find that if you are willing to bump that up to 12 months of expenses (which is not unreasonable anyway given your strong position) that your SO may be a lot more open to taking market risks with long term retirement assets.
"An investment in knowledge pays the best interest." - Benjamin Franklin

pingo
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Re: Finding middle ground with spouse on investing

Post by pingo » Mon Aug 15, 2016 11:49 am

Tyler9000 wrote:Sit down together and browse the historical performance of a bunch of different portfolios like the ones here: https://portfoliocharts.com/portfolios/
Simpler still would be Vanguard's Portfolio Allocation Models with the best and worst years of several basic asset allocations on one page.

BlueCable
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Re: Finding middle ground with spouse on investing

Post by BlueCable » Mon Aug 15, 2016 4:47 pm

pingo wrote: Simpler still would be Vanguard's Portfolio Allocation Models with the best and worst years of several basic asset allocations on one page.
Cool, are those Real or Nominal returns?

Edit: Assuming nominal since the bond fund has a 5.4% average return.

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