Data & Research February 2, 2016

Couples Can Clash Over Money Even Before They're Attached

Money issues are sensitive, especially for couples.
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When it comes to relationships, Americans rate financial issues high, according to the COUNTRY Financial Security Index. More than half of Americans surveyed (53%) say finances have caused tension in their romantic relationships—but that doesn’t mean they shy away from discussing money matters. An overwhelming majority (91%) said they believe it is important to discuss finances with a significant other.

Not only did survey respondents say it’s important to discuss personal finances with their partners, most (71%) prefer to start the conversation within the first few months of a relationship or sooner.

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More than three-quarters of respondents (78%) said someone who is single and dating should be concerned with the amount of debt carried by a potential partner, with men (77%) slightly less concerned about this than women (79%). This concern spiked for people over the age of 65 (88%).

Nearly a third of respondents (29%) said they think couples who work with a financial planner are less likely to have disagreements about finances than those who don’t, with women (31%) slightly more likely to think so than men (27%).

Once people are settled in a relationship, some conflicts may smooth out. According to Fidelity’s Couples Retirement Study, more couples agree than disagree about finances: 53% vs. 47%. When they do argue, the four top causes of money spats are spending habits (67%), not saving enough (37%), bills (33%) and debt (29%). Out of those couples who do have money clashes one in four says those spats are never resolved. On a positive note, nearly three in four couples say they communicate “exceptionally” or “very well” on financial matters. 

The low credit score of a potential romantic interest was relatively acceptable to most in COUNTRY Financial’s survey. Overall, respondents said this could be cause for moderate concern, with men (38%) less concerned than women (43%).

In COUNTRY Financial’s findings, debt was the biggest concern, with 78% believing someone who is single and dating should be concerned with the amount of debt their love interest has accumulated. Thirty-eight percent said they consider a large amount of debt to be a relationship deal-breaker.

NEXT: Americans think these are danger signs in a potential mate

Carelessness is an even bigger red flag, COUNTRY Financial found. More than half of Americans (52%) said they would end a relationship if their significant other lacked interest in managing their finances. And the same number (52%) believe income level is a big consideration for singles when choosing a partner.

“Most Americans can forgive their love interest for being in poor financial shape, so long as they care about changing for the better,” says Joe Buhrmann, manager of financial security at COUNTRY Financial. “Data suggests most Americans are less tolerant of a partner who isn’t focused on improving their financial situation.”

Some interesting differences show up among the generations of those surveyed. Millennials tend to be more accepting of a significant other’s debt level. Just 67% of Millennials are concerned with the amount of debt a love interest has accumulated, compared with 78% of the general population. This youngest demographic is especially at odds with the oldest segment of the population: 88% of Americans over the age of 65 believe a significant other’s debt is cause for concern for anyone single and dating.

Some advice from Fidelity’s survey comes from actual, experienced couples who wanted to share their best tips with younger couples:

  • Save as early as possible for retirement (57%);
  • Make all financial decisions together (41%);
  • Make a budget and stick to it (39%);
  • Definitely have an emergency fund (38%); and
  • Don’t hide purchases from each other (26%).

The 2015 Fidelity Investments “Couples Retirement Study” analyzed retirement and financial expectations and preparedness among 1,051 couples (2,102 individuals). Respondents were at least 25 years old, married or in a long-term committed relationship and living with their respective partner, and have a minimum household income of $75,000 or at least $100,000 in investable assets. This online, biennial study was launched in 2007 and is unique in that it tests agreement of both partners in a committed relationship on communication, as well as their knowledge of finances and retirement planning issues.

The Security Index can be downloaded from COUNTRY Financial’s website.

Data & Research February 2, 2016

Retirement Savers Value Formal Written Plans

Most pre-retirees and retirees surveyed said they would not have been as financially successful without a formal written retirement plan.
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A new LIMRA Secure Retirement Institute study finds that pre-retirees and retirees (ages 55 to 75 with financial assets of $100,000 or more) who have a formal written retirement plan are more likely to feel more confident they are saving enough for retirement and more than twice as likely to feel very prepared for retirement than those without one.

The study, The Benefits of Retirement Planning, found three-quarters of pre-retirees and retirees have some kind of financial retirement plan, but only 16% have a formal written retirement plan.

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Half of pre-retirees and retirees who have a formal written plan say they feel very prepared for retirement, compared with just 17% of those without one. Eighty percent of those with a formal written plan have estimated how many years their assets will last into retirement—nearly double those who don’t have a formal written plan (42%).

More than three-quarters (78%) of pre-retirees and retirees who have a formal written plan have developed a specific plan for generating income from savings; only 38% of those without a formal written plan have done so.

NEXT: Converting to guaranteed income

“Strikingly, most of pre-retirees and retirees we interviewed said they would not have been as financially successful without a formal written retirement plan, acknowledging their own lack of awareness and skill,” notes Matthew Drinkwater, PhD., assistant vice president, LIMRA Secure Retirement Institute. “Even the wealthier consumers said they found value in a formal plan—if only to review and vet their own ideas.”

The Institute found that pre-retirees and retirees who have formal written retirement plans are more likely to roll over and consolidate their assets within two years.  They are also more likely to convert a portion of their assets into an annuity within two years.

Pre-retirees with formal written plans are twice as likely to convert a portion of their assets into guaranteed income (22% vs. 11%). Retirees with formal written plans are three times as likely to convert a portion of their assets into guaranteed income (25% vs. 8%).

“Our research demonstrated that taking the time to create a formal written retirement plan—which involves a comprehensive discussion about goals, asset management and risk mitigation—often leads to better outcomes in retirement,” says Drinkwater.

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