Equalizing retirement accounts with spouse

Hi all, I've been pondering this idea for some time and am seeking input on how best to go about it.

I'd like to figure it out so my wife and I have roughly equal retirement accounts. It's complicated because she's a teacher who participates in the state teacher pension system (roughly 10% of each of her paychecks goes into this), so she won't need as much in her Roth and rollover IRA (from a previous job) as I would in mine, if we're trying to keep things equal. Because I won't have a pension. So in theory, we should be putting more money into my retirement accounts (401k + Roth) than into her retirement accounts (Roth), because she's already got about 10% of her paycheck going into her pension.

First of all, is this a silly goal to try and achieve approximately even balances between retirement balances? Or is it a worthwhile endeavor, just to ensure that we're both on even footing, since retirement accounts are individual but otherwise our finances are totally combined?

Second, are there any calculators out there to help with this, i.e. to find out the equivalent dollar amount of a 401k/Roth IRA account when compared to a pension fund? Like if a pension fund might be paying $50k a year in perpetuity, what would that equate to in a 401k or Roth IRA balance? And how does that relate to how much we're contributing currently?

At first glance, I might have said "We want to contribute 15% of our incomes into retirement. In my case, I'm simply putting 15% of my income into 401k & Roths. She's putting 10% of her paycheck into her pension automatically, therefore if she just puts 5% more into her account, that will be equal to mine." But I'm sure it's not as simple as this. Because our "balances" at retirement will probably be way different, even if we're each contributing 15% of our similar salaries toward pension/retirement, because the pension system is way different from how a 401k/Roth might grow and be calculated.

Hope this makes sense. Would love to hear what others think. Thanks in advance!

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  • Silver Guitar I suspect someone might chime in here, and I have thoughts, but they're pretty far outside the scope of YNAB! The answer may depend a lot on whether you live in a community property state.

    Two suggestions:

    1. Try asking on the Bogleheads forum. We're not affiliated with them, but the forum over there is full of very smart and generous people. They can also be very blunt.
    2. Structuring your portfolio this way is going to be very, very complicated. Aside from the pension issues, it's going to mean either trying to recreate precisely the same asset allocation in each spouse's portfolio (which may be impossible given 401k options) or having to make frequent changes to your deferrals in order to attempt to re-equalize the portfolio balance. So be sure you have an incredibly good reason for doing it. :)

    It sounds to me like your goal might be to ensure that your retirement assets are divided equitably in the event that Something Bad Happens. There are a variety of tools for achieving that goal, and I would consider all of them, even the ones that nobody wants to think about, like the one with "-nup" in the name. 馃榿 

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    • Matthew Thanks for your input on this! I've heard Bogleheads recommended before, and your suggestion here was the final nudge I needed to make my first post there :) Eager to hear what folks say.

      Yeah, I'm already leaning toward feeling like it's not worth fussing about too much. If anything, I'm hoping to just figure out rough contribution ratios. Like if we don't have enough to max our retirement contributions in a given year, should we put 60% into my Roth and 40% into hers since she'll have the pension. Hoping more to get in a general range where our retirement situations are at least not wildly disproportionate. And yes exactly - goal is to divide equitably in the event that Something Bad Happens.

      Our incomes and retirement accounts are nothing extravagant so we're not inclined to look into the thing with "-nup" in the name (lol)

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 4 mths ago
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      Silver Guitar Definitely Bogleheads... I'm one of them. And I can already tell you what they will say. You should view all the accounts as a single portfolio, so it doesn't matter how much is in either of them.  Within each account choose the best options available within the plans and just fill in the rest of the space based on what you want the total portfolio to look like.

      Where the accounts do matter are expenses... and the aim should be to reduce those as much as possible while still being able to maintain your target asset allocation.

      As long as you are each others primary  beneficiaries, it won't matter who goes first, and in the event of a separation the total assets are going to be split evenly, barring a "-nup" that says otherwise) so it won't matter which account is larger. Therefore you're covered. 馃槈

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    • Yeah, I didn't really think a nup would be involved, I just wanted to say "-nup". 馃槃

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 mths ago
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      Matthew Nup said.

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    • nolesrule Awesome advice, thanks! I was looking closer and saw that my wife鈥檚 teaching job鈥檚 optional non-pension retirement plan actually offers way more options than mine, including great Vanguard funds, so may be a lot better to prioritize than mine after I鈥檝e gotten my maximum employer match. Will dig into the fees to be sure. So even though she also has a pension, the idea of viewing it all as one combined portfolio sounds excellent and so much simpler. And were there to be a divorce (hopefully  never of course), the accounts would be split anyway.

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    • Superbone okay that鈥檚 e-nup!!

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    • nolesrule Matthew Already 22 replies on the Bogleheads forum! 馃榾 https://www.bogleheads.org/forum/viewtopic.php?f=2&t=349429 nolesrule They're definitely generally in line with what you said here. One interesting point was that there can be implications for Medicaid coverage for long-term care if our retirement accounts are way out of balance, which I'll have to look into more. But for now definitely leaning toward what you and so many others have said, which is to simply choose the best investment options regardless of whose name they're under.

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  • Cool answers from the bogleheads forum!  Also confirmed what I was thinking too.  It is so impractical and I am known to occasionally overcomplicate some simple stuff, but never this.  I don't even get how couples can do the whole percentage of income for this and that thing.  Just dump it together and make joint decisions, so much easier.  

    In my situation, there is NO way we could ever be equal in our retirement accounts.  I've never worked, he has all the income.  But I had money back in the day where I started investing earlier and intermittently started yearly rollovers into IRAs.  Plus, I have an inherited IRA too.  My tax-advantaged accounts are at least 4 times his.  So he has income, I have assets, and that's just how it's going to work for our lifetime (barring a lottery win).

    Like 3
  • My husband won鈥檛 get a trust, he always says everything will automatically go to me. Now I know that鈥檚 not the case. You鈥檙e helping me immensely. I鈥檓 hoping he鈥檒l listen to this and consider do things now. We live in California so I鈥檓 sure the state will not make it easy.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      Evelyn Caswell A living will and revocable trust is a good way to go in California. That's what I have anyway. There's no reason not to have one. Otherwise, you're leaving your fate up to the probate courts.

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