In comparing this year's study results to two years ago, couples show little progress in how they approach day-to-day finances, longer-term investing decisions and retirement planning basics. For example, the study found that less than half of couples make decisions jointly regarding the day-to-day financial decisions of the household such as budgeting and bill payment (45 percent). Even fewer couples jointly discuss investment decisions for retirement savings (38 percent). And on critical retirement decisions, 60 percent of couples don't agree on their respective retirement ages, 44 percent are not in agreement on whether they will work in retirement, and 42 percent have different ideas regarding their expected lifestyle in retirement.
"Many couples told us that they have fewer assets, will need to delay retirement and work longer, and are worried about the impact of inflation and rising healthcare costs on their retirement savings, yet they aren't talking, planning or managing their finances jointly to address these very important issues," said Kathleen A. Murphy, president, Personal Investing, Fidelity Investments.
Reactions to Market Turmoil
When couples were asked whether their risk tolerance had changed as a result of the recent volatility, many husbands and wives reported being more risk averse, with 41 percent of husbands and 54 percent of wives indicating a lower risk tolerance for their investments. As well, 73 percent of husbands and 64 percent of wives indicated their gut reaction during the crisis was to "stay the course," while 15 percent of husbands and 18 percent of wives reported a sense of "panic" and wanting to "pull out of the market."
It is very important, especially during highly volatile markets, that couples talk regularly and openly about their financial situation, assessing their time horizon, risk tolerance and asset allocation, deciding on a course of action and making appropriate changes to their holdings if needed.
This joint decision making process may lead some couples to decide they need to delay retirement or adjust their lifestyle expectations. In fact, husbands and wives in this year's study both report that they anticipate their expected retirement age to increase by one year - with husbands now planning to retire at age 64 and wives at 63. And, less than half (49 percent) of couples expect a comfortable lifestyle in retirement.
Retirement Planning Efforts
Couples generally agree what unpredictable financial issues in retirement concern them most, citing health care expenses (57 percent), inflation's impact on savings (41 percent - up 13 percentage points since 2007) and Social Security reductions (19 percent) as their top three.
To allay some of these concerns, couples should jointly research their health care options, understand the Medicare application process that includes timelines and premiums, and assess their need for supplemental insurance. Couples should also review their Social Security strategy jointly to decide at what age they will begin taking payments - factoring in longevity, taxes, employment and spousal considerations.
Although couples agree about their top financial concerns in retirement, they have not developed better planning habits. In fact, nearly 10 percent fewer couples report they had completed critical plans - be that a retirement plan, an estate plan, or a will - as compared to 2007. Fidelity recommends that couples who have not yet completed a retirement plan start the process by simply evaluating their essential and discretionary expenses, and then list all sources of predictable income, including Social Security and pensions, to see if they are on track to meet their retirement goals. Fidelity provides free, easy-to-use online tools that can help couples with this process including Fidelity's myPlan(R) Retirement Quick Check and Retirement Income Planner.
"We recognize that every couple's situation is different, with many husbands and wives experiencing a job transition right now, others assessing whether they are able to retire, and some simply juggling the competing financial demands of raising a family," said Murphy. "Each of these life events has clear financial implications that couples need to jointly discuss and then agree upon a plan of action."
Investment Product Ownership & Understanding
Fidelity's study this year showed that ownership of retirement investment products continues to be at high levels, but there is still confusion among couples regarding what they own and how these products work. For example:
- Annuities: Thirty-nine percent of couples don't agree on whether they own an annuity, and less than one-quarter of couples know the actual amount of money their annuity will generate for them in retirement.
- Life insurance: Although eighty percent of couples agree that at least one of them has life insurance, when asked if they understood the insurance coverage rule of thumb (7 times annual income), more than 9 out of 10 couples (95 percent) did not, and upon learning of it, nearly half (49 percent) agree they do not have enough coverage based on this rule.
- IRAs: Fifty-nine percent of couples agree they own an IRA, while 26 percent don't agree. In more than one-in-ten couples (11 percent), one of the spouses does not know when they can begin withdrawing funds from their own IRA.
- Real estate: Forty-four percent of couples don't agree about whether they will need to sell real estate to help fund their retirement.
"With the decline in pensions, uncertainty around Social Security and increasing healthcare costs, we're encouraged by the high ownership levels of retirement investment products," said Jon J. Skillman, president of Fidelity Investments Life Insurance Company. "Now the challenge is to help couples be better prepared for retirement by understanding what they own, how these products work, and their impact on retirement income."
Fidelity conducted the research with just over 500 married couples, comprising Baby Boomers and older pre-retirees, born between the years of 1937 and 1964.
