Marriage is more than just a commitment to the person you love—it’s a commitment to that person’s finances as well. Once you are married, you and your spouse must decide if you want to marry your retirement and financial accounts, too. This decision will be a key part of your retirement planning.
First things first: Is your retirement account considered marital property? Chances are, you and your spouse both have your own separate retirement accounts. In many states, the amount of money you have in your retirement account before you get married is considered separate property. Any money that is contributed to a 401(k) or IRA after the wedding is considered marital property.
With that said, any contributions made to a retirement account are generally considered marital property, regardless of the account holder’s name. If you have your own investment accounts while you are married, the funds are not considered separate property if the marriage ends in divorce. An attorney can provide you with advice about your state’s laws and regulations.
Because of the marital property rules, married couples should coordinate their strategies and meet with a financial planner to create a comprehensive plan that will benefit each person.
Three steps to coordinating retirement plans
The goal for you and your spouse should be to get on the same page so that investing for retirement is both hassle-free and rewarding for each individual.
Step 1. Look at all of your accounts. Reduce the number of 401(k)s and IRAs that you and your spouse may have spread out among different companies and/or previous employers. Even though each of your retirement accounts is in your own name, the two of you should have accounts with the same company. This will help you develop a retirement saving strategy that meets your collective goals.
Step 2. Review portfolios together. It is important for married investors to stay informed about each other’s retirement and brokerage accounts. Be honest with your spouse about investments, and review monthly statements together to make sure you are meeting your investment goals as a married couple.
Step 3. Consider a spousal IRA. This can be a good option if one spouse does not work. A spousal IRA can help the non-working spouse to save for retirement, and it also eliminates the earned income clause (like the one in traditional IRA accounts). The spousal IRA is the same product as an IRA, but it allows the working spouse to make contributions into the account in the stay-at-home spouse’s name.
Planning is the most important part of investing. When you are talking with your spouse about retirement and mixing investment accounts, make sure you meet with a financial advisor and an attorney to understand all possible scenarios, including divorce.
Jeff Rose is a Certified Financial Planner and Iraqi combat veteran. He blogs at Good Financial Cents, Soldier of Finance and Life Insurance By Jeff.