On the other hand, Chris Cooper, president of Chris Cooper Inc. in Toledo, Ohio, says he's had a different experience. "I have couples like this: The woman is a psychiatrist and the man is a chemical engineer. She makes $250,000 a year; he makes $60,000 a year. They live on a $300,000 income, and they have an $800,000 mortgage. If she dies, can he pay that mortgage? No. But will they take out life insurance? No, because you'd have to take out more on her than on him. So he has to admit he's dependent. It's harder for men to do that. It gets very difficult emotionally to get through that particular barrier right there, to get them to listen. I say, 'Look, reverse the roles,' but it's very hard to get the man to see that. That's an actual example, and I have several like this."
In second or third marriages, Cooper says, higher-earning wives he's advised sometimes are inclined to disinherit their spouses. "They say, 'If I die, I'm leaving all to my kids, and he can't even stay in the house.' Then you say, 'No, you need to leave him your pension, you need to leave him your 401(k), but what you do is leave it in a trust with a QTIP provision, so that when he dies, it goes on to your kids.' "
Overall, Holland says, she's found estate-planning issues usually aren't much different for couples with high-earning wives than for other clients, except if young children are involved. "They realize their very young children could inherit significant wealth, so we have very serious conversations about who should be guardian and who should be trustee. We typically have a client with young children who has significant wealth write a letter to the guardian and to the trustee about the purpose of the money, beyond just choosing them. It provides a little more guidance there and a little more for the children to hang their hat on when they get to be of age and they've got $2 million or $3 million. So for them, that's really the critical issue, but as far as the other estate-planning goes, I haven't seen an impact."
Retirement planning can present different issues when a wife outearns her husband. Phillip Cook, CFP and owner of Cook & Associates in Torrance, Calif., says in couples where the wife makes more money, an advisor may place less emphasis on the husband's retirement plan. That's the case with one couple he advises: The wife is president of the Internet division of a major newspaper. The husband's career is secondary, and because of that, not as much emphasis has been placed on his retirement plan.
Also, the wife's health can become a financial issue, particularly in retirement planning, he adds. He advises a couple in which the wife, who earns well into the six figures, was recently diagnosed with breast cancer. Her husband, who owns a business, doesn't earn as much as she does. "At this point everything is OK, but she doesn't want to work for as many years as she originally thought, so we have to rethink their situation," Cook says.
Another issue regarding retirement planning, particularly for high-earning, dual-income couples: "Do you keep each person's money separate if you have two 401(k)s or two IRAs, or do you combine?" questions Holland. "Let's say one only has one good fund choice; do you put all the international in that one account or do you keep them individually allocated and do the best you can?" She says some of her firm's clients have blended plans, while others look at their accounts separately.
Sameer Shah, managing director of Shah & Associates in Tampa, Fla., says his firm encourages clients to take a holistic approach. "We integrate the entire plan. A lot of advisors compartmentalize things. We say the right way to do this is look at it as one portfolio. One spouse may have a very liberal 401(k) plan, for example a self-directed situation where there's a lot of flexibility. The other may have a very structured plan, where there's only two or three options. That becomes a key factor in our planning, because what we try to do is to allocate tax-efficient asset classes to taxable accounts and tax-inefficient asset classes to the deferred accounts. The best situation for us is when one or both have self-directed IRA plans, where we can do more interesting allocations in terms of asset classes that are not the traditional asset classes, like small-cap international securities, REITs, even going as far as hedge funds. We say, 'Look, your wife's plan or your husband's plan is highly undiversified, but that doesn't matter, because in the plan of your overall situation, it's very diversified. Instead of being incredibly volatile, they add this incredible diversification to the overall portfolio.' "
Advisors say dual-income couples, particularly when both the wife and husband make high salaries, usually have more options when it comes to retirement planning than single-earner couples have.
"They have much more flexibility and many more choices in terms of retirement because they are able to save significantly more. You see many of these couples, especially in their early forties, who are in major high-stress jobs making a lot of money, but looking down the road and saying, 'I don't necessarily want to retire in my fifties, but I'd really like to do something less stressful and spend more time with my family,' and all of those issues. And they have that opportunity because of the fact they have the two incomes. They can put more money aside, so they can make some of those choices," Lassus says.
Says Harper: "That's really a beneficial situation, because it's much more likely they're going to have enough money to retire early and hit their financial objectives because of that dual-income stream. So I see it as a benefit as opposed to a problem. If you have two people producing $200,000, it's a lot easier to achieve their financial goals than if you have someone who's making one of those incomes."