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Published October 18, 2010, 12:20 AM

Money Talk: Joint accounts not every couple’s choice

Q: My husband and I have been happily married for a year but have reached a disagreement on how to handle our finances.

By: Liz Pulliam Weston, INFORUM

Q: My husband and I have been happily married for a year but have reached a disagreement on how to handle our finances. I think that we should have a joint bank account only to pay bills, with each of us putting in a percentage of our income into it while retaining separate accounts for everything else. He thinks that we should have just a joint account.

I’m the main breadwinner, so it’s primarily my money that would be going into the account, and I’m just not comfortable having only a joint account. While I have no problem spotting my husband for things, I don’t like the idea of his being able to spend my money without my say-so.What is your advice on how to handle this?

A: There’s no one right way to set up your finances as a couple.

Half of married couples have only joint bank accounts, according to a Harris Interactive poll, while 18 percent have only separate accounts. Twenty-nine percent take a combined approach, with both joint and separate accounts, and 3 percent have no bank accounts.

Those who decide to hold all their accounts jointly often say it helps them to be on the same page financially and supports the idea that they’re working as a team. Those who opt to keep their finances separate may have suffered through bad financial experiences with partners, including divorce, that make them wary of mingling money.

The joint-plus-separate approach allows for a bit of both worlds: joint handling of bills and other expenses while keeping some money separate for each person to spend as he or she chooses. If you opt for this approach, though, you’ll need to make sure that all the accounts are adequately funded. For example, the joint account will need to have enough money to cover all the bills you’re likely to face, and the separate accounts should have enough for reasonable personal expenses. Being stingy with the grocery money or a lesser-earning partner’s “allowance” shouldn’t be an option.

What may matter more than the configuration of accounts is how you handle spending decisions. Many couples have a “talk to me” amount, which means any purchase above a certain dollar amount must be discussed with and agreed upon by the partner. The limit could be $50, $100, $500 – it depends on the details of your finances.

You’ll also need to discuss how much to allocate for retirement, debt repayment, vacations and other big expenses, since those budget items affect how much is left over for other spending. And if you have a joint account, both of you should have online access so you can check the balance frequently to avoid overdrafts.

Q: This is regarding the couple in good financial shape who asked if they should save more for retirement or focus on paying down their mortgage. I suggest you recommend that 60-year-olds pay off their mortgage under any circumstances. They can afford to miss out on investment income. They can’t afford to be stuck with a mortgage. I’ve read some sad testaments to this. To those telling you how many more years they plan to continue working, they should take into consideration that they may not be allowed to continue working.

A: It’s true that many people are forced to retire earlier than planned, but that in itself isn’t a reason to prioritize paying down a low-rate, potentially tax-deductible mortgage over saving more for retirement.

The two people in question were 50 and planning to retire in 10 years when they turned 60. They had no credit card debt or other loans except for a 15-year mortgage at 4.5 percent. If they’re in the 25 percent federal tax bracket and itemize their deductions, that would be an effective rate of just 3.4 percent. In any case, it’s a pretty cheap loan and one that would be paid off within a few years of their retirement. They almost certainly would be far better off taking advantage of opportunities to put more money into 401(k) accounts and Roth IRAs.

Liz Pulliam Weston is the author of “Your Credit Score: Your Money and What’s at Stake.” Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or via the “Contact Liz” form at www.asklizweston.com.