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Preparing Your Spouse to Manage the Portfolio

A reader writes in, asking:

“This week there was a great discussion on the Bogleheads about preparing your spouse for how to handle the finances once you’re no longer there. I would be interested in hearing your thoughts on simplifying a portfolio for the sake of a spouse. My current AA has 7 different funds plus a few smaller things we’ve picked up here and there that we’ve never gotten rid of.”

There are several things you can do to put your spouse in a better position to manage the portfolio after you’re gone. For example, I think all of the following actions would be helpful:

  1. Simplify the portfolio to the extent practical,
  2. Provide a specific, written plan for how to manage the portfolio,
  3. Reduce the significance of the portfolio by increasing annuity-type income, and
  4. Establish a relationship with an advisor.

It’s worth noting that such actions are helpful not only for protecting your spouse in the event of your death, but also for protecting you in case of cognitive decline later in life. No matter how smart you are, you’re not immune to Alzheimer’s or dementia. And the fact that you’re still at the top of your game is precisely why you want to be making these decisions right now rather than later, when your abilities might not be as strong.

Simplifying the Portfolio

A portfolio that is simple to one person may be a logistical nightmare for another person. For example, rebalancing even a relatively simple 3-fund allocation would be quite difficult for many investors if the portfolio is spread out across several accounts. If your spouse isn’t comfortable with a spreadsheet, that’s not the type of task you want to leave to them.

When it comes to simplifying, most people have a few pieces of low-hanging fruit:

  • Eliminate duplicate accounts by moving everything to one brokerage firm so that you don’t have, for example, traditional IRAs with three different companies.
  • Eliminate holdings of individual stocks and bonds.
  • Eliminate any holdings whose role in the portfolio is questionable in the first place (i.e., anything that you would have already sold if not for simple inertia).

Beyond that, it’s just a question of how simple you want to make the portfolio. For example, you might want to simplify to a “total market” -type portfolio instead of one with separate allocations for various sub-asset-classes (e.g., REITs or small-cap value stocks). Or, you might even want to simplify all the way down to a single all-in-one fund (e.g. Vanguard’s Target Retirement Income Fund).

If, however, a significant portion of the portfolio is in taxable brokerage accounts, there are a few additional things to keep in mind:

  • You may want to continue hanging on to holdings where significant capital gains have built up.
  • If you do not have unrealized capital gains in your holdings, it might be preferable to make these changes now (even though you’re still alive and in full possession of your mental faculties) rather than later, by which point capital gains may have built up, thereby creating a cost for your spouse to make the switch.
  • One-fund solutions might not be the best choice, given the tax-inefficient nature of the fund-of-funds structure.

Providing a Written Plan

In addition to simplifying the portfolio, you’ll want to provide a set of written instructions for how to manage it. The plan should provide clear instructions not just about the target asset allocation, but also regarding:

  1. When and how to rebalance,
  2. How much can safely be spent per year, and
  3. How to decide which account(s) to spend from each year.

Annuitizing More of the Portfolio

Income from a lifetime annuity is easy to handle — all you have to do is decide how to spend it. As such, if you have doubts about your spouse’s ability to manage an investment portfolio, you may want to take actions to ensure that most (or even all) of your spouse’s basic needs are covered by annuity, pension, and Social Security income.

Note: Like purchasing an annuity, delaying Social Security benefits has the same effect of reducing one’s reliance on investment returns, and it is often a better deal than purchasing an annuity on the private marketplace.

Establishing a Relationship with an Advisor

If you think the best plan for your spouse is to use the services of an advisor, I would suggest selecting the advisor and having your spouse meet with the advisor now, before the actual time comes to make full use of his/her services. If your spouse is already comfortable with this person, it will make things much easier when the time comes.

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  1. I have a simple written plan for my wife upon my passing.

    1. Read, “Investing Made Simple,” and believe it.

    2. Any questions, go to

    3. I have a hand selected Garrett Planning Network planner’s contact info for her. Just in case.

    How’s that for simple?

  2. I would go farther than the above. The original question assumes there is a spouse, which of course may not be the case. But in terms of death and cognitive decline, everyone should have an estate plan that includes at least a will, perhaps a trust, and also documents related to financial power of attorney and a health care directive in case one is incapacitated. When setting up my own estate documents, I asked my lawyer about how I should best assist my executor to locate my accounts and other assets, and he proposed creating a set of written instructions similar to what Mike describes. This document is sealed at my lawyer’s office along with all my other estate papers; and it inventories all my personal possessions and where to find them, and lists all my financial accounts, monthly bills, mortgage and car papers, and the like, so that a spouse (if there were one) or an executor (if not) could find all necessary financial information in one place.

  3. Larry,

    I kept my suggestions limited to the investing-related topics, simply because that was the nature of the reader’s question. But I very much agree with your suggestions regarding other estate planning documents.

  4. I understand. But since the question raised the issue of “preparing your spouse for how to handle the finances once you’re no longer there,” I think my additions were relevant.

    (Maybe your next book can be “Estate Planning Made Simple”?)

  5. Coincidentally, if I were to write another book, estate planning would be the topic.

  6. Howdy Mike,
    This is very good info. I have today started my document to outline our investing philosophy, asset allocatons, list of accounts, where they are at, usernames and passwords and how they work. Then we will do a periodic training thing where she will login to the accounts and show me how much she understands. Then demonstrate a certain amount of ability to do some of the basic things. I will work to consolidate the accounts, close unnecessary accounts and do my best to get all the investment and retirement accounts over to Vanguard.

    From a post over at the Bogleheads I learned that Vanguard has a document for what to do if a spouse dies. See here:
    and pdf file checklist here:

    This stuff really makes you think. For example, I have a finger print reader on my laptop and realized that my wife Vivian, could not even get in to the laptop it if I suddenly went to the big pasture in the sky. 🙁

    I to would like to see a book from Mike on estate planning.

    More info on things like what I read in this Bogleheads thread:

    Where it reads:
    “In some states, unless the Will says that the executors and trustees don’t have to post a bond, the executors and trustees may have to get bonded by an insurance company, as security against the risk that they steal the trust assets. The cost of the bond is borne by the estate or trust. I can’t recall a case where a client wanted his/her executors or trustees to have to post a bond. (In some jurisdictions, the court may require a fiduciary to post a bond, notwithstanding such a provision in the Will, though in some cases the amount of the bond may be less than it might otherwise be.)”

    Seems like it could be possible material for a book. 😉

    I would like to get a lawyer but everyone I have called gave me the heebe geebes. We need wills, living wills and advanced medical directives and such. I have no idea what a fair price is for such things. I have considered Legal Zoom but then heard that you can get sideways if the will for some reason doesnt meet your state’s requirements.

    Thanks Mike for getting the wheels turning on this.
    Happy trails, Mike

  7. This is one of my biggest worries. For now, I deal with it by not dying (knock on wood). But we do need to come up with a Plan B, mainly because my Plan A can’t work forever.

    We have an estate plan in place, but this doesn’t really help with things like day-to-day portfolio management. And my wife isn’t a die-hard diy’er like me so we may need to identify someone to help manage things in the event of my untimely demise.

  8. Over the last few months I simplified my family’s investments to include only index funds and consolidated accounts. This is really good advice that is rarely taken up because of the sensitivity of the topic, and I’m guilty of the same. I need to take steps to make a book to put in the safe with user names/passwords and instructions in case of cognitive failure or death.

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