Marital assets & asset allocation

[Lusitan]

For those who are married, do you treat your investment portfolio and your spouse's investment portfolio as one portfolio or two portfolios when it comes to asset allocation.

For example, if both of you agree that an asset allocation of 75% stock / 25% bonds is the right allocation for you, do you maintain a 75/25 split within each of your two portfolios (IRAs, 401Ks, etc.) or do you allow for one spouse overweighting one area while the other spouse overweights a different area, so long as the total asset allocation for the combined accounts in on target?

I'm just curious - so far, we have been just setting all of the accounts to be the same as the overall asset allocation. But we could get some dramatic decreases in savings if we did otherwise - e.g, by each of us overweighting different asset classes (while still maintaining our asset allocation overall when you look at both our accounts together) and purchasing Vanguard Admiral funds with much lower (sometimes 50%) espense ratios (that require minimum 100K invested in each fund).

Obvious downside is that each spouse's individual portfolio could perform wildly different (either better or worse) than the two portfolios as a whole, which would be an issue in a divorce. And of course, we're not planning on getting divorced, but then again nobody does!

Anyway, just thought I'd throw that question about there to see what everyone else is doing, or if anyone had thought about this before.

[haha]

Quote:

Originally Posted by Lusitan For those who are married, do you treat your investment portfolio and your spouse's investment portfolio as one portfolio or two portfolios when it comes to asset allocation.

I think that unless you have a very complete pre-nup or post-nup, you ned to manage the marital assets realistically, which means jointly. Manage an inheritance or other separate property separately, if you plan to keep it separate. IMO a good idea.

On form, the most likely disruption to a married person's financial plan is divorce.

Ha

[Darryl]

It's one portfolio and that's how I manage it. My wife is a southern belle (we're not from the south) as she just expects me to take care of it. Wherever I can I try to keep the amounts and allocation similar in case she gets sick of me (only been married 23 years). I don't want her dad or the judge upset that all the dough is in my name.

[Life_is_Good]

We manage them all as one portfolio... even though some accounts are only in one of our names or the other. After 25 years of marriage, it's unlikely she's going anywhere and neither am I.

[ats5g]

We definitely treat all our retirement savings as one portfolio. I'd definitely go for it if it means that you can get admiral shares and decrease your expense ratios. I think our weighted expense ratio is something on the order of 0.15%.

- Alec

[twaddle]

Quote:

Originally Posted by ats5g We definitely treat all our retirement savings as one portfolio. I'd definitely go for it if it means that you can get admiral shares and decrease your expense ratios. I think our weighted expense ratio is something on the order of 0.15%.

Could you elaborate on that, Alec? I thought retirement accounts had to be titled individually. And I thought that Vanguard didn't let you combine different account balances for admiral qualification.

[Lusitan]

Alec is referring to the idea I was getting at - it's not that we can title IRA assets jointly (we can't) but we can split up the asset allocations so that we can qualify for Admiral shares more easily.

For example, let's say hypothetically we want to have an overall asset allocation that's 25% bonds, 10% REIT, 30% international stock, and 35% U.S. stock. If I have 250K in my IRA accounts and my wife has 250K, and we each create this asset allocation, the funds in my account will look like this:

$62,500 bond index fund
$25,000 REIT index fund
$75,000 international stock index fund
$87,500 U.S. stock index fund

And in this example, because my wife also has a total of 250K in her IRA accounts, she'd have the exact same thing in her portfolio. Notice how neither one of us can hold any Admiral shares because we don't have over 100K in any fund.

But if we decide to concentrate ownership of asset classes in each account, we can reduce our costs by holding Admiral shares. For example, in my IRA accounts I could hold:

$175,000 U.S. stock index fund*
$50,000 REIT index fund
$25,000 bond index fund

And my wife could hold in her accounts:

$150,000 international stock index fund*
$100,000 bond index fund*

The three funds that have asterisks next to them are now eligible for Admiral shares, so our expenses are reduced. And our overall asset allocation is the same: 25% bonds, 10% REIT, 30% international stock, and 35% US stock.

That's what my post was about and was Alec was referring to.

[mb]

In general it is managed as one portfolio.

W don't have a problem with having different asset allocations for "her money" and "my money" if that optimizes the return on "our money."

MB

[twaddle]

I also view all accounts from an asset allocation perspective, but for me it was more about tax efficiency than expense ratios. I needed more tax-sheltered room for our tax-inefficient investments.

I was expecting some push-back from DW when I told her I was thinking of selling all of the stocks in her IRA and buying junk bonds, but she was cool with it after I explained the rationale.

[Maurice]

For me its all about tax efficiency. There's no difference in treatment whether its hers, ours, or mine. Most of our wealth is in taxable joint accounts anyway.

[lucija]

Quote:

Originally Posted by Lusitan For those who are married, do you treat your investment portfolio and your spouse's investment portfolio as one portfolio or two portfolios when it comes to asset allocation. ....<snip> But we could get some dramatic decreases in savings if we did otherwise - e.g, by each of us overweighting different asset classes (while still maintaining our asset allocation overall when you look at both our accounts together) and purchasing Vanguard Admiral funds with much lower (sometimes 50%) espense ratios (that require minimum 100K invested in each fund). .... <snip>

For AA/contribution purposes we treat all accounts as part of one portfolio ("our"). Our goal is to consolidate and minimize expenses (we mostly index, so our approach is pretty straight forward). You may, however, keep some overlap (not the same fund necessarily, but the same asset class), it really comes handy when you need to re balance. I think the above approach is good only for couples similar in age/life expectancy... if you expect your partner to outlive you by 15+ years, you may want to re-consider...

In addition, we divide future contributions based on best options available to each of us... For example, neither one of us has access to REITs (so, new contributions are added through rebalancing), he almost exclusively covers LC and international and my contributions are directed towards bonds, SM and MC.

I think the above approach simplifies investing, provides maximum tax efficiency and minimizes expenses. I agree, you may end up with crazy individual profolios in the end, but strangely enough, our balances are pretty much what I would expect if we maintained "double" porfolios (perhaps the reason is that we end up shifting gears quite often, due to 401k/job changes).

[tightasadrum]

Anything DW has in retirement assets I hold separate. The assumption is that I'll die before she does due to a 7-year difference in age. So I don't even consider her funds which are in moderately aggressive funds with a little in cash right now.

All other assets, paltry pension, ira's, roths, after-tax, investment real estate are considered for AA. I think of her's as extra freeboard for her to deal with as needed. If I survive her, that's' another problem. In fact, I suppose I should go ahead and make DD the 1st person to inherit her funds in case assets happen to grow too much. I really need to get all this put to bed for estate purposes. But that's another thread.

[justin]

We manage all assets jointly as one portfolio. For example, she has all the VG small cap value fund in her IRA. I have all the total market index in my 401k. In the event of divorce, all our assets would be subject to equitable distribution, and any retirement accounts would be subject to Qualified Domestic Relations Orders (QDRO's). Which means if the marital estate couldn't be split equitably, and one partner had a large share of assets in a retirement acct, the other partner could get a QDRO to maintain their rights to assets in those accounts.

[jIMOh]

Quote:

Originally Posted by Lusitan For those who are married, do you treat your investment portfolio and your spouse's investment portfolio as one portfolio or two portfolios when it comes to asset allocation. For example, if both of you agree that an asset allocation of 75% stock / 25% bonds is the right allocation for you, do you maintain a 75/25 split within each of your two portfolios (IRAs, 401Ks, etc.) or do you allow for one spouse overweighting one area while the other spouse overweights a different area, so long as the total asset allocation for the combined accounts in on target? I'm just curious - so far, we have been just setting all of the accounts to be the same as the overall asset allocation. But we could get some dramatic decreases in savings if we did otherwise - e.g, by each of us overweighting different asset classes (while still maintaining our asset allocation overall when you look at both our accounts together) and purchasing Vanguard Admiral funds with much lower (sometimes 50%) espense ratios (that require minimum 100K invested in each fund). Obvious downside is that each spouse's individual portfolio could perform wildly different (either better or worse) than the two portfolios as a whole, which would be an issue in a divorce. And of course, we're not planning on getting divorced, but then again nobody does! Anyway, just thought I'd throw that question about there to see what everyone else is doing, or if anyone had thought about this before.

We have one allocation. 75% domestic equity and 25% international equity.

Each account is 75-25.

the breakdown in each mimics 45% large cap domestic, 15% mid cap domestic, 15% small cap domestic, 15% large cap international and 10% small cap international.

This way questions like above are moot (who gets bonds, who gets international...)

I have had one job in 11 years, yet 4 401ks because of getting bought and sold. If I had to repick IRA and 401k funds for each buy/sell, I would run into transaction fees (add to this my wife has had 4 401ks in last 7 years as well).

[Lusitan]

Quote:

Originally Posted by jIMOh We have one allocation. 75% domestic equity and 25% international equity. Each account is 75-25. the breakdown in each mimics 45% large cap domestic, 15% mid cap domestic, 15% small cap domestic, 15% large cap international and 10% small cap international. This way questions like above are moot (who gets bonds, who gets international...)

The question isn't moot unless both you and your wife have enough in your accounts such that you own at least 100K in every fund in both accounts. The question is whether it makes sense to consolidate assets to reach 100K per fund and take advantage of Admiral shares.

I just remembered that old SNL skit - The Question is Moot!

[jIMOh]

Quote:

Originally Posted by Lusitan The question isn't moot unless both you and your wife have enough in your accounts such that you own at least 100K in every fund in both accounts. The question is whether it makes sense to consolidate assets to reach 100K per fund and take advantage of Admiral shares. I just remembered that old SNL skit - The Question is Moot!

we don't invest with Vanguard, so not an issue over here. Most Assets are with T Rowe Price if given the choice.

[mathjak107]

since my wife and i follow the fidelity insight newsletter we just make one big portfolio

[packrat44]

Quote:

Originally Posted by Lusitan For those who are married, do you treat your investment portfolio and your spouse's investment portfolio as one portfolio or two portfolios when it comes to asset allocation. which would be an issue in a divorce. And of course, we're not planning on getting divorced, but then again nobody does!

We treat our investment portfolio as one unit for simplicity rather than 3 portfolios (joint trust for taxable; DWs retirement account; my retirement account). No divorce on the immediate horizon. We both figure it has been difficult training the other over the last 32 years where we don't want to go through all that work again.

[Animorph]

We treat three taxable accounts and 2 401k's as one portfolio. The 401k's hold some of the cash/bond investments that are not tax efficient. The taxable accounts fill in with asset classes that the 401k's don't have. Looking at any one account alone would probably give a financial planner heartburn about our future.

One thing I have been thinking about is that during retirement we will draw down the taxable accounts first, leaving only the 401k's. So the 401k's (or roll-over IRA's by then) will have to start looking more like the overall AA as the taxable account drains. Since changes in AA in the IRA's are tax free that shouldn't be a problem, but I may not be able to replace some of the closed funds in my taxable accounts. I'll be watching for any of those funds to open so I can establish a position for the IRA's.

Dan

[WM]

We are currently each invested separately for Roths (same asset allocations), and DH is in the TSP, with the rest in joint taxable accounts. As I get smarter from reading all the good advice around here I will probably clean things up a bit and make sure that it's allocated the way I want it, as a whole. It's at least close, but I haven't looked in a while. And now that you mention it, splitting things up to get to admiral shares earlier could be a good bonus.