Life After Full-time Work Blog

Learn about preparing for life after full-time work through posts from Don's upcoming book.

#45 Can Partners Reconcile Different Attitudes Towards Risk?

When partners find that they have different attitudes to risk, there are many sensible ways to proceed.


A modest new feature

Before this week’s post, permit me to draw your attention to a modest new feature.

A reader suggests: “When you send out a blog, is there any way of updating us on responses to previous blogs? This would help me immensely, as I would not have to search through them to see if I’ve missed anything. In some cases these comments have led to interesting expansions of the conversation … As a visitor to your site, let me reiterate the benefit of that last point to an avid follower such as me.”

Thank you.  Very good advice.  I’m grateful for the time readers devote to the website — I should make it easy rather than difficult for you!  From now on, with the first post of every month I’ll list the posts that have drawn comments in the previous month.

Here’s the first such list:

#44 ( ,

#43 (  ),

#42 (,

#37 ( ),

#33 (


On to this week’s post.

It’s trite to remark that people are different. One occasion when the differences may be important is when you need to decide where you are on the eat-well-versus-sleep-well spectrum. Let’s discuss what happens if you’ve actually discussed the subject, along the lines in the three previous posts, and you’ve come to the conclusion that your risk tolerances are different.


Before I list the five possible ways to deal with it (of which only one is wrong – the other four can all work, depending on the circumstances), let me say that typically the man is willing to take more risk than the woman. And I say this because it’s probably hard-wired into our brains, to be that way.

You may read elsewhere that it’s the neurotransmitter (brain chemical) dopamine that drives us to take risks, but that’s not the explanation here, because both men and women have lots of dopamine going through our brains. It’s testosterone that causes men to typically take much more risk than women. It’s a neurotransmitter that drives aggression and risk-taking, and men typically produce ten times as much testosterone as women.

Researchers Barber and Odean wrote a paper about risk-taking in investment. They looked at thousands of household brokerage accounts, and found that men are more overconfident than women, they therefore trade much more frequently, and since there’s no basis for overconfidence their results are much worse. The differences were so stark that, instead of the typical jargon-filled academic title, they called their paper “Boys will be boys.”[1] And they led it off with a lovely quote from nineteenth century American humorist Josh Billings: “It’s not what a man don’t know that makes him a fool, but what he does know that ain’t so.”


OK, enough fun. Let’s suppose you’re both sensible, not overconfident, and disagree about how much risk is tolerable. It’s straightforward to list all five ways you can resolve the difference.

  • Go with the one who wants to take more risk. The probable (not certain – nothing is ever certain) outcome is that you will both eat more, and one will sleep less well than he (or more likely she) is comfortable with.
  • Go with the one who wants to take less risk. The probable outcome is that you will both eat less.
  • Take the average of the two. The probable outcome is that you will eat less well than if you took more risk, but better than if you took less risk; and one will sleep less well than is comfortable.
  • Divide the assets according to whatever formula you can agree on, and each invests his or her own portion and lives with the consequences.
  • Ask your investment professional to make the decision for you.

I don’t know how you and your partner resolve serious differences, but really those are the options open to you. They’re probably uncomfortable, unless the difference is small and you go with the third option (the average), in which case the impact on the eating and sleeping outcomes may not be large.


The fifth option is the one that’s simply wrong. Why? Because this isn’t an investment issue, as I’ve stressed ( This is a personal issue. And, as I stressed in Post #2 ( about being an informed consumer of expertise, in this case you are the experts on the subject of yourselves, and it isn’t investment expertise that you need to resolve this, it’s expertise on the subject of knowing yourselves. That’s not your investment professional’s natural domain.

Perhaps you can find someone else (a member of the family, a friend?) who knows you both almost as well as you know yourselves and can bring some external or objective wisdom to bear on the disagreement.

It’s a tough one.



It’s natural for partners to have different attitudes towards risk. It may be difficult to find a single approach that leaves both reasonably comfortable. But remember that this difference is a personal issue, not an issue requiring investment expertise.


[1] Barber, Brad M. and Terrance Odean (2001). “Boys will be boys: gender, overconfidence, and common stock investment,” The Quarterly Journal of Economics, February 2001. Available at SSRN: or



I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.

4 Responses to “#45 Can Partners Reconcile Different Attitudes Towards Risk?”

  1. J. J. Woolverton says:

    Don, two thoughts came to mind when I read your latest. Don’t get too excited, I didn’t mention that they were good thoughts. Firstly, I treat partner differences in setting financial goals like setting the inside temperature in a home. One wants the temperature set at 74 degrees while the other wants it at 66. A compromise at 70 might stop the bickering, however, both parties may be unhappy with the results. The average might not be right, but, might be the only answer.

    Secondly, with most of the articles I have read regarding private wealth individuals, a main assumption is that both partners are the same age, or very close. As the divorce rate seems to be around 50%, the new younger spouse, if a woman, might, actually, have a higher tolerance and a greater willingness to take on more risk than the husband.

    Just saying.

    And, totally agree, the advisor is not the answer. Partners need to take the time to outline their own return objectives and risk tolerances. One way I found useful was for couples to determine what is important to them at this moment in time (basically, what is their life style, and how it is supported). Drop back 20 years to see if they could have developed a financial plan then that would/could support their current life style. From there, develop a financial plan for the life style they hope to have 20 years down the road, and what would be required to support it. I convince couples that this is a “fun” exercise, so they don’t think of it as a chore. The benefit is to see what was their situation 20 years ago until now. They, typically, significantly underestimate what they would have needed to support their current life style. As a result, I find they take a more serious look at the future with more realistic assumptions. The whole point of the exercise.

    • Don Ezra says:

      Thanks, these are actually extremely good and useful thoughts (hardly a surprise, coming from you). I like the temperature analogy — I wonder if it can be taken further, via the metaphor of a sweater or something like that, but it doesn’t hit me right away. And thanks also for the reminder of potentially large age differences — something that places a totally new factor in the equation (even if, with your example, there remains a big difference, just in the opposite direction from the traditional one I described).

      The game you describe is ingenious — a very imaginative way to teach them lessons from their own experience that they would have no idea about.

  2. Ted Harris says:

    Might I add that ongoing communication with regard to investment decisions and the rationale behind them (hopefully backed up with factually relevant data and information) should be part of the relationship, even if the discussion is not long and complicated. This can reduce misunderstanding, and if the investing partner goes first the surviving partner is not unfamiliar with the thought process behind investment decisions that may have to be made.

    Another division of duty based on roles may be for one partner to be the lead investor and the other to spend the proceeds. My observation is that often the spender saves returns over the budget – which may serve to compensate for future shortfalls in either the market or the investment decisions-making.

    • Don Ezra says:

      Thanks, this adds a lot to the discussion. Yes, ongoing communication is essential, particularly if one partner is the investor and the other is unfamiliar with investment. In our case we plan to repeat Dad’s Decumulation Talk with our children from time to time, as well, so that knowledge about the overall philosophy is spread within the family.

      I’m intrigued by the novel division of duties that you mention, and would love to know how our readers react. Would the spender be genuinely willing to cut back, rather than resentful, if the investment return is below budget? (This is in the case where the shortfall comes before any budget surplus ever appears.)

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