How many retirement accounts do you and your spouse have? Do you both have Roth IRAs and a 401k retirement plan at work? Or, old ones from a former job?
You may find out after closer inspection that your separate plans do not mesh well with each other. In fact, you may find yourself poorly diversified with a lot of fund overlap if you are not too careful.
You may want to add several checks to your annual investing portfolio rebalancing this year to synchronize your entire family’s retirement plans. Here are some things to consider.
Look at Your Family as a Whole
One of the best ways to synchronize your entire family’s retirement planning is to look at the family as a whole unit instead of multiple accounts owned by two people. Your spouse’s retirement accounts and his or her asset allocations need to dovetail into yours as well.
There is a risk of overlapping investments between a husband and wife’s retirement accounts. There are many basic current accounts available that you can choose from in order to help you diversify your investments, savings accounts, and other assets.
For example, many 401k retirement plans promote index funds as their fundamental investment choice. Are you and your spouse investing in the same types of assets without even realizing it? You have the very good potential for both people to be over weighted in an index fund or ETF that invests in a broad market index such as the S&P 500.
Inspect Your Investments And Allocations
There are several ways that you can ensure that your asset allocations as a family provide you with diversification across several asset classes. You can each set up separate asset allocations between, stocks and bonds, as well as both choosing like large and small cap funds,
Are You Capitalizing on Retirement Plans?
A spousal IRA and Roth IRA are other retirement plans that you want to ensure that you are using as much as possible. Even if your spouse does not earn an income, you both can invest in separate Roth IRA accounts assuming that at least one of you has an earned income and meets the contribution limits.
A Roth IRA is such a valuable tool that allows families to reduce the amount of taxes they pay in retirement, and taking advantage of investing $10,000 as a family even if your spouse is not currently working can have a dramatic effect on your retirement nest egg.
It can often be worth the effort of one spouse funding both in a family effort to maximize retirement benefits. Families should also strive to ensure that they capture any employer matching 401k contribution if available to one member of the family and not miss out on free money for retirement.
View Your Plans Together
One way to monitor your family’s eclectic collection of retirement funds is view them all in the same place. Services like the ones offered by Mint.com, banks, and other financial websites that allow you to view several accounts from many different sources provide families with a single place to review and focus their attention.
It is very easy to see which accounts may be doing well or which ones need more of your family’s focus when they are all displayed on one website. Websites like Mint are great places not only to track your spending habits but to easily see all of your family’s retirement accounts in one place. Mint.com – FREE Money Management Software!
A family should approach retirement thinking like one entity instead of a collection of accounts owned by two separate people. A husband and wife’s retirement accounts can interweave and support each other providing increased diversification when approached as one.