Adjust my AA to compensate for spouse AA?

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K72
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Adjust my AA to compensate for spouse AA?

Post by K72 » Sun Mar 24, 2019 12:39 pm

My wife and I are at loggerheads with respect to retirement funds AA. We've each managed our own IRA/401K/403b accounts independently. She is completely uninterested in financial matters and won't engage in financial discussions for more than a few minutes at a time.

I think our aggregate AA of more than 70% stocks is too aggressive for our age (both in mid 60's and in various stages of retirement). I've been targeting 60/40 stocks/bonds overall but am now thinking that 50/50 or even 40/60 might be more suitable.

My question is whether it makes sense to adjust my AA to compensate, which would likely mean putting 100% of mine into bonds. This would still make our aggregate more than 50% stocks overall for retirement funds. My wife simply won't budge on her AA (she thinks bonds have terrible returns and is uninterested in topics such as return vs volatility).

delamer
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Re: Adjust my AA to compensate for spouse AA?

Post by delamer » Sun Mar 24, 2019 1:20 pm

I would adjust to 100% bonds in your position.

However, you’ll probably need to force a discussion about allocation as you both approach RMD time.

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K72
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Re: Adjust my AA to compensate for spouse AA?

Post by K72 » Sun Mar 24, 2019 1:39 pm

delamer wrote:
Sun Mar 24, 2019 1:20 pm
However, you’ll probably need to force a discussion about allocation as you both approach RMD time.
Why? I don't understand.

delamer
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Re: Adjust my AA to compensate for spouse AA?

Post by delamer » Sun Mar 24, 2019 3:15 pm

K72 wrote:
Sun Mar 24, 2019 1:39 pm
delamer wrote:
Sun Mar 24, 2019 1:20 pm
However, you’ll probably need to force a discussion about allocation as you both approach RMD time.
Why? I don't understand.
If your wife is 100% in stocks at RMD time and the stock market has a big drop, is she going to be happy/comfortable selling stocks to make her legally-mandated withdrawal?

Now if she is just going to turn around and reinvest the RMDs in a taxable account, it might not matter.

But if the RMD money is going to be spent, then she should consider moving a couple years worth of RMDs to cash prior to age 70.5.

retiredjg
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Re: Adjust my AA to compensate for spouse AA?

Post by retiredjg » Sun Mar 24, 2019 3:37 pm

K72 wrote:
Sun Mar 24, 2019 12:39 pm
My wife simply won't budge on her AA (she thinks bonds have terrible returns and is uninterested in topics such as return vs volatility).
Do you think she would be willing to use CDs instead?

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oldcomputerguy
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Re: Adjust my AA to compensate for spouse AA?

Post by oldcomputerguy » Sun Mar 24, 2019 3:40 pm

I include my wife’s holdings in my spreadsheet of our total portfolio, and adjust my tIRA holdings when rebalancing is necessary to maintain an overall AA. No worries.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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K72
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Re: Adjust my AA to compensate for spouse AA?

Post by K72 » Sun Mar 24, 2019 5:28 pm

@delamer: thanks, I understand now.

@retiredjg: hmm, interesting idea about CD's. I'll bring it up when I get a chance.

@oldcomputerguy: thanks, I'll likely end up doing the same

Trader Joe
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Re: Adjust my AA to compensate for spouse AA?

Post by Trader Joe » Sun Mar 24, 2019 5:38 pm

K72 wrote:
Sun Mar 24, 2019 12:39 pm
My wife and I are at loggerheads with respect to retirement funds AA. We've each managed our own IRA/401K/403b accounts independently. She is completely uninterested in financial matters and won't engage in financial discussions for more than a few minutes at a time.

I think our aggregate AA of more than 70% stocks is too aggressive for our age (both in mid 60's and in various stages of retirement). I've been targeting 60/40 stocks/bonds overall but am now thinking that 50/50 or even 40/60 might be more suitable.

My question is whether it makes sense to adjust my AA to compensate, which would likely mean putting 100% of mine into bonds. This would still make our aggregate more than 50% stocks overall for retirement funds. My wife simply won't budge on her AA (she thinks bonds have terrible returns and is uninterested in topics such as return vs volatility).
Your wife is right. You are wrong.

pdavi21
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Re: Adjust my AA to compensate for spouse AA?

Post by pdavi21 » Sun Mar 24, 2019 5:40 pm

If you go 100% bonds, she will likely beat you, and it will be even more difficult to change her mind.

You should compromise and pool your AA. Solve it now before more damage is done.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

retiredjg
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Re: Adjust my AA to compensate for spouse AA?

Post by retiredjg » Sun Mar 24, 2019 5:54 pm

K72 wrote:
Sun Mar 24, 2019 12:39 pm
I think our aggregate AA of more than 70% stocks is too aggressive for our age (both in mid 60's and in various stages of retirement). I've been targeting 60/40 stocks/bonds overall but am now thinking that 50/50 or even 40/60 might be more suitable.
I think you are correct that 70+% stocks when you are in your 60's is probably too aggressive. Yes, there are some situations where it is fine and reasonable, but only if both parties are willing. That is not the case here.

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celia
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Re: Adjust my AA to compensate for spouse AA?

Post by celia » Sun Mar 24, 2019 6:35 pm

Since you are in ‘various stages of retirement’, have you both sat down to discuss how you will cover your living expenses in retirement? You need to coordinate with each other on pensions (single or double life), when to start SS for each of you and how much you need to withdraw from retirement accounts and from whose accounts that will be.

I see no way it will work out to your mutual advantage unless you discuss it. If you individually each start SS at 62, that will probably be bad. Depending on your retirement tax bracket and post-age-70 bracket, you should want to control your taxes, possibly by doing Roth conversions by whoever has the most stock funds. The worst scenario is each of you pulling out living expenses from your retirement accounts (including RMDs) without knowing what the other person is doing.

Workinprogress
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Re: Adjust my AA to compensate for spouse AA?

Post by Workinprogress » Mon Mar 25, 2019 1:38 am

I wonder how many people are in the position of the OP?

In our household, the largest battles have been over how her stock broker brother has mismanaged her funds. One example, >30% of her portfolio in cash from '09 to mid '16.

I have just decided to write off any amount that goes in that direction. No more battles. It is cheaper than a divorce.

In my case, I have been far more aggressive than the standard to compensate for the shortcomings of her account.

rkhusky
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Re: Adjust my AA to compensate for spouse AA?

Post by rkhusky » Mon Mar 25, 2019 3:24 am

K72 wrote:
Sun Mar 24, 2019 12:39 pm
I think our aggregate AA of more than 70% stocks is too aggressive for our age (both in mid 60's and in various stages of retirement). I've been targeting 60/40 stocks/bonds overall but am now thinking that 50/50 or even 40/60 might be more suitable.

My question is whether it makes sense to adjust my AA to compensate, which would likely mean putting 100% of mine into bonds. This would still make our aggregate more than 50% stocks overall for retirement funds. My wife simply won't budge on her AA (she thinks bonds have terrible returns and is uninterested in topics such as return vs volatility).
Do you need to take higher risk to fund your lifestyle? Are you hoping to leave a large portfolio for your children? If the stock market drops by 50% and doesn't return to even for 5 years, how would that affect your lifestyle?

If what you have is enough to fund your lifestyle, why take the risk of a high stock allocation. Based on the stock allocation in Vanguard's target retirement funds, a 50/50 AA is a reasonable target for someone in retirement at 65 with a normal expected lifetime.

Larry Swedroe says to consider your ability, willingness and need to take risk.

If 50/50 is what you are comfortable with, I would sell stocks in tax-advantaged to get as close to that as possible. Your wife will thank you during the next stock crash.

nick evets
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Re: Adjust my AA to compensate for spouse AA?

Post by nick evets » Mon Mar 25, 2019 8:22 am

Workinprogress wrote:
Mon Mar 25, 2019 1:38 am
I wonder how many people are in the position of the OP?
I am, kinda.

After a couple unpleasant go-rounds with retirement accounts (once with a financial advisor) my wife has settled in with her TSP and an external IRA, and is completely disinterested in the subject. To adjust our AA (around 60:40) I have made my own 401k almost completely aggressive, and will tweak that as needed to maintain the AA.

However, we're about 12 years from RMD's being a consideration.

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