12 Investment Mistakes Couples Make

If two heads are better than one, do couples have an advantage when it comes to investing?

The reality is that it's difficult enough for two people to share a closet, much less money styles, financial priorities and investing strategies.

As a result, there are a number of couple-related investing errors that planners and attorneys see again and again.

Investing Mistakes Couples Make

1. Too Many Accounts

With a lot of couples, investment accounts are spread over a number of banks, brokerage houses and financial institutions.

Result: "It's a little out of control," says Karen Altfest, vice president of New York-based L.J. Altfest & Co. "It's too much for most people to handle."

Andrew Tignanelli, CPA, CFP and president of Financial Consulate Inc., in Baltimore, sees this often when only one spouse is managing the investments. "What happens to your spouse if you're not around, and you have money in seven or eight places?" he says.

When he poses that question to couples, either the light finally dawns or one spouse produces a notebook with directions on where all the money is located, he says.

Still, for a partner who is not used to dealing with investments, going on a financial scavenger hunt is going to be a hassle, says Tignanelli. A better alternative: Consolidate investment accounts in one location, he says.

2. One Spouse Deals With the Money Manager and Investment Advisers

Both parties need to develop and maintain a relationship with any and all the family's financial advisers, says Tignanelli. If something happens to one, the surviving partner will need a working relationship and sense of trust to manage those investments effectively.

If you're the one who normally handles the investing, try inviting your significant other to sit in, says Altfest.

If you're the one who doesn't normally get involved, this can be a good way to get your feet wet.

3. Not Putting Enough Aside for Retirement

The goal: 10 percent of your take-home pay, says David Bendix, CPA, CFP and president of the Bendix Financial Group in Garden City, N.Y.

But that amount "will vary depending on people's situations," he says. Another glitch Bendix sees: "They're not starting early enough."

4. Too Much Money Tied Up in Cash

For long-term goals like retirement, many couples have "too much cash and too much in bonds" or other low-return vehicles, says Bendix.

Everyone has a different risk tolerance, though. Sit down with a financial adviser who can help draft an allocation plan that will meet your comfort level and needs, he says.

5. One Party Isn't Getting a Voice in Investment Decisions

Financial advisers see it all the time: One spouse loves the bigger returns often associated with stocks. The other, leery of risk, is more comfortable with a lower return and less in stocks. What often happens: The spouse who manages the investments decides the split.

But the spouse who's "just along for the ride" has to live with the results, too. "What spouse wants to wake up one day and see this was all decided without them?" says Altfest.

In an era with a 50 percent divorce rate, many husbands and wives aren't thinking about what happens if they have to face retirement with just 50 percent of the money they created together or even only the accounts titled in their own names.

"It's the kind of thing you should be giving thought to," says Altfest.

When Kathleen Miller, CFP, author of "Fair Share Divorce for Women" and president of Miller Advisors Inc. in Kirkland, Wash., counsels couples, she has each partner take a quick quiz that assesses their risk tolerance. The quiz format allows couples to talk about it and "have some fun with it," she says.

In some cases, the goals and tolerance are similar enough that a blended strategy will truly satisfy both people. In others, it can make sense for partners to each keep their own investment accounts with asset allocations that will meet the comfort level of each.

"In my opinion, each party is better to have their own investment strategy with their money," says Miller. "That way, you own your own investment portfolio and the objectives."

Attorney and columnist Jan Warner has seen too many spouses discover bad investments or emptied accounts after the fact. "I think the premise that people should invest together is wrong," he says. Too many times, couples aren't really investing as a team, says Warner. Instead, one partner takes charge, and the other doesn't know what's going on.

Instead, he says, "Both partners need to take an active part in the investment strategy and know what's going on -- not just trust the partner."

But that doesn't mean that you and your partner should operate in a vacuum.

"You still want to see where it fits into the whole," says Miller.

6. Failing to Diversify Those Investments

Different assets will accumulate wealth at different rates. And many are cyclical.

One way to protect your retirement accounts from economic ups and downs: diversify. Talk with your adviser to draft an asset allocation plan you can live with and stick to it, says Miller.

Some talking points for conversation: Look beyond the basic labels of stocks and bonds to analyze what makes your portfolio truly diverse. How are you spreading your money and risk over different categories, like large and small companies, foreign and domestic investments, and various industries?

7. No Shared Goals

"One household should have one set of goals. Otherwise, it's very difficult," says Altfest. "You shouldn't each go off half-cocked."

She makes sure to ask a couple what their goals are and how they plan to work toward them.

It's also important to distinguish short-term, midterm and long-term goals and invest accordingly, says Bendix.

8. Skipping Regular Account Maintenance

The same people who are religious about regular service for a car they'll keep for four years can be complacent on maintenance for retirement accounts that will last a lifetime.

Sit down together every three months and look at your quarterly statement. Examine account balances annually, and rebalance those investments if necessary, says Miller.
Recognize that you're going to have to revisit those allocation plans as your life changes.

One detail that often gets lost in the shuffle: beneficiary designations. One spouse or the other may not have updated beneficiary cards on various brokerage and retirement accounts, which means whoever they named at 21 or 22 (a parent or former spouse) will inherit the accounts, regardless of remarriage, kids or wills.

9. Commingling Inherited Assets

"One of the worst things you can do is put it in an account with both names," says Warner, partner in ElderLaw Services of South Carolina.

If you're planning to use that inherited money during retirement, keep it in an account under only your own name. Once the money's been placed in a joint account, many states consider it marital (read "joint") property. That means if the marriage splits up, you could lose 50 percent long before you reach 65.

10. Investing in Things They Don't Understand

"Too many people today are investing in things they don't understand," says Warner.

That puts you at a disadvantage in several ways: First, you might not have bought what you think you bought. Second, getting out of it could be more difficult than you planned. Stick with tried-and-true vehicles that you understand and trust.

11. They Don't Know How Their Adviser Makes Money

When someone is giving you investment advice, you need to understand how that person gets paid -- and by whom. Depending on how the person is compensated, "there can be economic biases," says Tignanelli.

The professional offering advice might be making a sales commission, a percentage of the profits earned over a period of time, a flat fee, or a combination, depending on who you hire, the title and the rules specific to that field.

Warner is leery of taking advice from advisers who actually work for the brokerage houses or who hold the assets. "I think it's a conflict," he says. Another benefit to going with a smaller independent: more time and attention for clients with smaller portfolios.

Beware of institutions that push their own proprietary products, says Warner, who includes language in trust documents prohibiting institutional trustees from investing in proprietary products.

Whatever ground rules you set for your own adviser, finding an impartial advocate and understanding exactly how that person gets paid can make you a more savvy investor, Tignanelli says.

12. Not Collecting That 'Free Money' at Work

If your employer offers a match for 401(k) contributions, take the money. Too many couples don't, says Bendix. It's "wasted, because they feel they can't do it," he says.

But once they get through the initial pinch, they do just fine, he says. Says Bendix, those automatic payroll withdrawals are "a great forced savings."