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Q&A: Can Spouses Combine 401(k) Accounts?

Know the rules of combining retirement assets.

Question: Would it be possible for my wife and me to combine the 401(k) accounts we have at our separate jobs into one account? Wouldn’t the two combined grow much faster than they do separately?

Ric: Sorry, no. And even if you could combine them, you wouldn’t get higher profits.

Retirement accounts must remain solely in each person’s name. The only ways to move money from your account to someone else’s account is to die (leaving the money to your beneficiary) or divorce (giving the money to your ex). Neither of these strategies is desirable.

Let me also emphasize that you suffer no harm by maintaining his-and-her accounts. Two accounts each holding a dollar have the same ability to grow in value as one account with two dollars. The only reason this might not occur is fees, in that two small accounts might pay higher combined fees than one larger one.

You raised this question because you’re obviously interested in maximizing the growth of your savings as a couple. With that in mind, my recommendation is that you and your wife talk about how you’re each investing so that you’re investing in tandem and not choosing investments that are counteracting each other.

With our clients, sometimes we invest one partner’s assets differently from the other’s. We might do this because we’re trying to build a more diversified portfolio among the entire household’s assets than we can with just one or the other. Sometimes there are tax or liquidity issues affecting one spouse’s account that aren’t pertinent to the other’s. But when one spouse’s investments differ from the other’s, their returns will likely vary — and that might annoy one of them. (He made more! She lost less!)

To help avoid a spat, we explain why we’re building their portfolios differently — it’s because we’re trying to optimize the total risks and returns. If there are fears a rift might occur, we can solve it by simply investing all the accounts identically. That way, each will have the same investment experience.

This is an issue worth discussing with your advisor to help ensure marital harmony.

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