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When calculating worth do you look at combined or individual total assets?
Old 06-10-2011, 08:45 AM   #1
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When calculating worth do you look at combined or individual total assets?

Hello, this is my first post on this website after many months of lurking. I am 33 years old, work for corporate America, married and have a 5 year old child. My husband is 7 years older than I and he started saving much later than I did. It wasn't until we got married and I took over the finances that he actually set up his retirement account (10 years ago). We are both on the right track to a comfortable retirement (probably not early though) assuming that we continue to have good health and work-full time until we retire (life can throw you off sometimes).

We both contribute to our 401ks to the max, plus we get a nice match from both of our companies. We also have pensions, and just started to contribute to our Roth IRAs this year and hoping to maximize the limit from here on (border line of not qualifying... after that we will switch to traditional ira).

While reading posts on how much people have in retirement assets I noticed that it is always mentioned the household COMBINED value, not individual. Why is that? just curious..... I am the primary financial manager in our house and I always look and count our assets individually. I am looking to reach a goal of $1M when I turn 45 but never thought of looking to see when we will both reach that $1M mark. Though we are married and we combine our finances for household expenses, our retirement accounts are separate and by the time we retire we will most likely retire at different ages: 60 for me and 62/65 for him. Well who knows really how long it will be..... we really do not have any major plans on what we would like to do when we retire. We enjoy our jobs now and we enjoy our life as we have it now so our current life is not a burden at all.
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Old 06-10-2011, 08:58 AM   #2
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To me it depends on whether you plan on being together through your retirement. I combine our net worth because if something were to impact one of us financially, it would impact both of us.

Welcome to the site!
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Old 06-10-2011, 08:59 AM   #3
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if I were in your situation, I would track both individually and collectively just because it would make evaluations of major life change's impacts easier in the future. By major changes I mean changes in employment status, changes in pensions, changes in retirement plans (IRAs, 401k, etc) .

I did not start saving until age 33 and with a divorce and split of 401k, I was able to react, adjust, and overcome to achieve the means to become FIRE'd at 55. As young as you to are, I think you have made a great start. Good luck!
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Old 06-10-2011, 10:55 AM   #4
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We track our net worth as a household, not individually. In the context of our finances, tracking NW individually is meaningless. We have all joint accounts, and started our marriage with roughly equal net worth of close to zero (got married during grad school). In the event of the premature demise of our marriage, I imagine it would be a 50/50 split. But in the meantime, we plan to live happily ever after on our joint assets once we reach our magic number.
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Old 06-10-2011, 11:18 AM   #5
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Quote:
Originally Posted by 01drummer View Post
While reading posts on how much people have in retirement assets I noticed that it is always mentioned the household COMBINED value, not individual. Why is that?.
In our situation, we're in it together... everything we have is 'ours'. 'Course then again we're old pharts and have been married for almost 34 years. Maybe our way of doing things is old fashioned.

However, if we kept our finances separate....if I had a cookie and he couldn't afford to buy one, I'd give him half of my cookie.
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Old 06-10-2011, 11:34 AM   #6
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we are planning on staying together, God willing. But I think that the age we retire is very much individual. For example, I hope to retire with a nice healthy fund at 60 but DH will be 67 by then... but he is hoping to retire at 65, 2 yrs before I retire. I have a specific amount I want to reach before I retire, independently of how much DH has in his retirement funds.
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Old 06-10-2011, 11:43 AM   #7
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I guess it depends on how you think things will go in the future...


I account for investments individually, but total them to get a NW... we have a prenup and legally it is separate, but as long as we are both married, we are in it together... so combined...


IOW, I am not going to retire when I hit a number and have my wife work for her share since she does not have enough...
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Old 06-10-2011, 11:49 AM   #8
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Originally Posted by FUEGO View Post
We track our net worth as a household, not individually. In the context of our finances, tracking NW individually is meaningless. We have all joint accounts, and started our marriage with roughly equal net worth of close to zero (got married during grad school). In the event of the premature demise of our marriage, I imagine it would be a 50/50 split. But in the meantime, we plan to live happily ever after on our joint assets once we reach our magic number.
Same here.
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Old 06-10-2011, 12:08 PM   #9
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Originally Posted by Texas Proud View Post
I guess it depends on how you think things will go in the future...


I account for investments individually, but total them to get a NW... we have a prenup and legally it is separate, but as long as we are both married, we are in it together... so combined...


IOW, I am not going to retire when I hit a number and have my wife work for her share since she does not have enough...
ummmm... I never thought about it that way. Maybe I should

So when you all say that you want to retire at a certain age or with a certain amount, you take into consideration how much you have combined and then execute. I always thought *I* would retire when I hit my magic number which should be right before 60 but thought 60 was a good number for me. Regardless of how much DH had in his retirement funds and when he would retire.
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Old 06-10-2011, 12:24 PM   #10
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If you combine your finances for household expenses now, won't you do that for retirement too? I guess I can see the split if he'd rather take his part of the excess after household expenses and spend it on hobbies, cars, etc, while you are choosing to tuck a lot more away for retirement. But if you're basically on the same page, it makes more sense to me to consider them combined. Suppose his 401K somehow tanked because the company misused the money, would you tell him, tough luck, you're working til you're 80, I'm still retiring at 60?

It doesn't mean you have to retire and the same time or the same age. One of you may like working better, or need a few more years to vest in a pension or be eligible for retiree medical, or to keep medical benefits for the both of you, or any other of a number of reasons why you would retire at different times.
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Old 06-10-2011, 12:29 PM   #11
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Everything in our home is combined and we share all of the bills. I don't know why I never thought to combine the retirement funds as well. I guess because they are in our individual names and everything in our house is individual too (bills) with the exception of the house.

Well if I add both accounts the number changes quite a bit... that makes me feel really good but I think it could also be deceiving because isn't it supposed to replace a high percent of our individual income? For years I have been obsessing about investing and reading but never really thought of this.
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Old 06-10-2011, 12:35 PM   #12
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We calculate as a combined financial unit because that is how we live. If we got divorced all assumptions would be tossed. We would both do OK but not in the style we have grown accustomed to. If I was 33 I might keep an eye on the viability of the separate portfolios but I didn't focus on such things three decades ago.
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Old 06-10-2011, 12:53 PM   #13
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... but I think it could also be deceiving because isn't it supposed to replace a high percent of our individual income?
% of income is a poor estimator of retirement needs. It gives you some idea of keeping a similar lifestyle, assuming that's what you want, though some people are ok with living more simply to get out of the rat race earlier. But for many people, expenses are very different in retirement.

As you get closer to retirement, you'll need to look at your estimated expenses in retirement, not a % of your current income. Your expenses will go down if your mortgage is paid off, the kid is self-reliant, you don't have commuting expenses, work clothes, etc. You'll also no longer be putting away part of your income for retirement, and you may be paying lower taxes. It always amused me to hear that I'd need to replace 80% of my work income when I was saving 30-40% of that income already.

On the flip side, you may have additional expenses for medical, leisure travel, hobbies, maintaining a house that is getting older, and so on.

At your age, you can focus on accumulating as much as you can and as you get closer you can look closer at those estimated expenses to see when you can pull the trigger. This assumes you are saving enough to retire sometime around 60, which it sounds like you can.

If you aren't tracking expenses now, start doing so. That'll help a lot when you do start to prep for retirement. I was pretty surprised when I realized I wasn't accounting very well for home maintenance and car replacement.
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Old 06-10-2011, 01:18 PM   #14
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We calculate seperately. We also keep all assets seperately, except the house.

Costs are split, either based the ratio of our incomes or 50/50, depending on the nature of the expense. Shared expenses are discussed ahead of time and require mutual approval.

Once we each meet those shared expenses, financial obligation to one another ends. I could buy a sports car without critcism, she a hot tub. We often go in together on something fun, like a trip or a new camera.

Total transparency with respect to our personal finances and transactions is still expected. We know what each other has and how it is being spent. When I hired a financial advisor, we both went to every meeting.

As the higher income spouse, I have found that spending at a level my wife cannot afford leads to marital strife. As a previous poster said, if she cannot afford a cookie, I'd better share mine or do without. Primarily I do without (saving the money). Lately I've also been working with her to increase her income.

With this approach, we almost never fight about money. More importantly, it ensures my wife learns the financial skills needed to live well, independently. I think we peer better and have a stronger relationship as a result.

We definitely would be ok with retiring at seperate times. Not sure if it would happen though. I'd rather work a little more to subsidize her retirement. Then I could have her company during the early years of mine. I'd prefer that.
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Old 06-10-2011, 01:23 PM   #15
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We pretty much combine everything. The only thing we have to think about separately is penalty-free availability of retirement funds -- DW's pension, Trad IRA's, a SEP, a 401K, and SS -- as there are a few years of age difference. But in the big picture, it is all "our's".
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Old 06-10-2011, 01:44 PM   #16
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Calculated combined in marriage #1. Attorneys kindly assisted in determining hers and mine.

Calculate separate in marriage #2.
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Old 06-10-2011, 01:46 PM   #17
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I've always calculated a combined net worth, even though our IRA's have to be in individual names. Cars, houses, bank accounts etc have always been in joint names.
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Old 06-10-2011, 02:04 PM   #18
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We track all living expenses, and retirement accounts, combined. I did calculate when we could retire together, though DW decided to countinue working. However we do maintain individual accounts for for individual spending, including cars. That does make a nice contingency/long term care fund since they are not included in retirement calcs.

From the time we got married we've pooled all work income and split it 50/50. After the common expenses (including retirement savings), we individually spend/invest the rest. Unfortunately DW has saved a bit more than me.

Given your current financial arrangements, it seems reasonable to determine individual retirement dates.
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Old 06-10-2011, 02:43 PM   #19
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Everything is combined for DW/me since day 1 of our marriage (40+ years ago). I/we never thought about the idea of yours/mine.

BTW, my parents were divorced within the first few years of our marriage so we both understood early on what can happen in that situation. Neither of us wanted to live "separate lives" to face a future "what if" situation. Heck, if that's the case, why get married? I know a lot of folks would disagree with that statement, but that's just the way we've always felt.

Works for us...
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Old 06-10-2011, 02:58 PM   #20
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% of income is a poor estimator of retirement needs.
+1

Forget what you read in the paper about "needing x% of your pre retirement income".

What you need is to cover 100% of your post retirement expenses.
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