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Two accounts holding the same index fund look diversified but overlap almost completely
Lay both partners' investments out together after the wedding and you'll usually discover one thing: what you thought was diversification is the same bet placed twice.
What doubling up looks like
The typical picture:
- Both 401(k)s are in a "target date 2050" fund
- Both IRAs hold an S&P 500 index fund
- Both of you work in tech, and both hold company stock
Looked at separately, each account is perfectly sensible. Looked at together, your household assets are heavily concentrated in the same holdings, and positively correlated with your source of income (tech salaries). When the market falls, shrinking investments and layoff risk arrive at the same time.
Three things to review together
1. Whether your two 401(k)s are doubling up
List the holdings in both accounts and look at the overall stock/bond ratio, geographic spread and sector concentration.
The fix usually isn't changing both sides, but treating the two accounts as a single portfolio, such as putting equities in one and bonds in the other, or using one to fill the geographic exposure the other lacks.
There's a tax benefit to this too: you can put the least tax-efficient assets inside the tax-advantaged accounts.
2. Whether your emergency fund is big enough
Marriage changes your expense structure (a bigger place, maybe a second car), so the target amount needs recalculating.
And there's a new risk to account for: if you both work at the same company, or in the same industry, your unemployment risk is correlated. In that case the fund should be thicker than the standard advice suggests.
3. Insurance gaps
After marriage, another person depends on your income. That's the real moment to review life insurance, not for yourself, but for the person left behind.
While you're there, update the beneficiaries on every policy (see item 19 of the checklist).
You don't merge the accounts
To be clear: retirement accounts can't be merged in the first place (A 401(k) and an IRA are both individual.) What's being described here is looking at them together, not combining them.
And individually held accounts serve a purpose, especially when one spouse is home full time, where a spousal IRA keeps those years from being a blank (see item 77 of the checklist).
A practical method
Open a spreadsheet and list every investment account you both hold: account type, holdings, amount. Then compute the overall percentages.
Most people are startled the first time they do this, finding that 70% of the household's assets are sitting in one place.
Update the sheet once a year afterwards; it doesn't need frequent adjustment.
In one line
Treat the two accounts as one portfolio and you'll see the diversification is illusory, and if you're in the same industry, make the emergency fund thicker.