Should You and Your Spouse Keep Separate Brokerage Accounts?
Spouses tend to do a lot of things together. But should you also invest together? Read on to find out.
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I have a set of married friends who do absolutely everything together. They work at the same company, and because of that, they commute together, eat lunch together, and run errands together after work. On weekends, they shuttle their son to activities together even though he's an only child and doesn't need two parents to accompany him to soccer or swim lessons.
My husband and I do things a bit differently. Even though we both work from home full-time, we eat lunch together a handful of times per year at most. And while we could run errands together, usually, we like to divide and conquer where he'll go to Costco and I'll do a regular grocery store run to save time.
My husband and I also have different interests, and because of that, we don't always spend that much time together on evenings and weekends. But one thing my husband and I do like to do together is invest. Since we're working toward the same goals, we decided years ago to open a joint brokerage account.
You may be thinking of doing the same. But if you're not sure that's the route you should take, ask yourself these questions.
1. Do we have the same financial priorities?
Maybe your goal in investing is to retire comfortably, while your spouse's goal is to pay for college. If your priorities are totally different, then it could pay to keep separate brokerage accounts so you can each invest for the things that are important to you.
On my end, my husband and I have joint brokerage accounts for college and retirement because both are important to us. But we've always agreed on those points.
2. Do we have the same investing style and risk tolerance?
My husband and I uphold a few basic rules and preferences with investing. We like to maintain a diversified portfolio, and we feel reasonably OK with taking on risk because the goals we're saving for -- particularly retirement -- are still pretty far off.
But you and your spouse may not see eye to eye when it comes to the assets you invest in and the risk you want to take on. If you're someone who can't bear the thought of owning stocks but your spouse is insistent on it, that could be a reason to open separate investment accounts.
3. Are we trying to take advantage of tax breaks when investing?
Certain investment accounts, like individual retirement account (IRAs), let you set money aside for retirement in a tax-advantaged manner. But as the name implies, IRAs can't be shared accounts. If you and your spouse each have earned income, you can contribute to your own account individually.
That said, one thing you can do in this situation is max out your IRAs and then put the remaining investment dollars into a joint account. That's what my husband and I do -- we each try to max out our own retirement account and contribute to a shared account beyond that.
This year, IRAs max out at $7,000 for savers under 50 and $8,000 for those 50 and over. So let's say you and your spouse are in your 30s and can each allocate $10,000 from your paychecks to investing. What you may want to do is each fund an IRA with $7,000 to get the tax break, but then each put $3,000 into a shared account.
Some spouses are comfortable combining their finances to the greatest extent possible. I can tell you that while my husband and I don't necessarily do everything together, other than our respective retirement accounts, our accounts are joint ones. Pooling our money helps us work together toward shared goals. But if that's not a system that works for you, then there's no reason you and your spouse can't keep your investments separate.
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