Question: How do you plan your investments when you're planning for people of different ages? If a family has one person who is of retirement age and another who's much younger, how should common investments be allocated? Conservatively (keeping in mind the older person) or aggressively (in the interests of the less old person)? Thanks!!! Rina, Bronx, NY
Answer: It's an intriguing and increasingly common question. From the perspective of the household, the good news is that with one spouse continuing to earn an income, there's less need for the retired spouse to draw on savings. It makes it easier for the retired spouse to delay taking Social Security, too, a boost to the benefit. The working spouse can continue to fund a retirement savings plan. If the retired spouse doesn't qualify yet for Medicare, the working spouse can provide coverage, assuming the spouse gets health insurance through work. And, of course, the retired spouse can take care of many household chores, from managing finances to maintaining the home.
What about the portfolio? My sense is that unless the age gap is 11 years or more, the asset allocation implications aren't major. You'll still want to have a well-diversified household portfolio. The working spouse is getting older and will probably adjust every year toward a more conservative investment scheme. My guess is that, in the end, the overall household portfolio -- the two spouses combined -- will be somewhat less conservative than the asset allocation of the typical retiree, but not radically so.
However, that's a general observation. How you invest your money really depends on your living standard, your goals and your desires. You want to match your needs and aspirations with your finances and income. It's why my main advice for anyone in your situation is to consider consulting with a financial planner, preferably a fee-only certified financial planner. I know. I'm usually wary of putting savers and planners together.
But the expertise of a planner can be valuable at major transition points, such as retirement. You and your spouse have an additional layer of questions that could make the consultation especially fruitful. It's also a way to deepen the conversation about finances and Social Security, as well as your expectations, goals, and time together during this stage of your lives.
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