She’s conservative. He’s aggressive. Now what?

Photo: Victor Hanacek for Picjumbo

 Q: My wife and I are in our early 40s. We both have 401(k) plans, but we’re on different planets when it comes to deciding how to invest the money. Mine is in relatively aggressive stock funds, but she’s far more conservative and she has hers invested in a bond fund. I think she needs to be more aggressive. What do you think?

A: Money disagreements between married partners can be a big problem, but you both have to remember the most important part: your goals.

There is no absolute right or wrong here, but each of your decisions can make a big difference in your financial future.

“Your gut feeling about your wife being too conservative is correct when taking into consideration that she is 20-plus years away from taking withdrawals from her 401(k),” said Brian Power, a certified financial planner with Gateway Advisory in Westfield. “Practically speaking, the longer the time frame you have to invest, the more aggressive you can afford to be.”

But Power said there’s also a problem if you’re ignoring your wife’s risk tolerance.

“If your wife’s investments are invested too aggressively based on her psychological ability to see her money drop in value, that is a recipe for your wife to make knee-jerk reactions, wanting to get out of the market at the worst time or when the market goes down,” he said.

Plus, it’s important to understand what rate of return is needed on your wife’s 401(k) for you to reach your combined retirement goals.

“You might find out that if she puts the money under her mattress, you are still able to achieve your retirement goals,” he said. “If that’s the case, why increase your wife’s anxiety by investing more aggressively when she doesn’t need to be?”

You didn’t say exactly when you plan to retire, but given that you’re in your early 40s, we’ll assume you’ll have at least another 10 to 15 years before retirement.

If that’s the case, then your wife should indeed have a  more “balanced portfolio,” said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

“But while she should have  more stock funds in her portfolio, you, too, should have more bond funds in yours,” Hook said. “The proper asset allocation for someone is usually a function of their time horizon for needing the  money and their willingness to accept some volatility in the account balances during the time period the money is invested.”

But, he said, at all times it is prudent to have a diversified mix of both stock and bond funds.

Of course, it is  difficult to get someone who is ultra-conservative to invest heavily in stock funds and to abandon their bond funds.

Hook said one way to make the transition is to gradually increase the conservative person’s stock fund holdings over time. That way, say over a period of one year, their holdings can be more balanced between stock and bond funds.

“The great thing about periodic investments in a 401(k) plan is if the stock market goes down, more shares of the stock fund are purchased,” Hook said. “Then when the stock market recovers value, those funds are greater since you own more shares.”

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This story was first posted in November 2014. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.