"...If you don’t know how to make one, don’t worry about it. I’ve got you covered!"
Hey guys, Mike Frontera here and welcome to another edition of retirement theory!
You know, over the past 15 or so years, I’ve been working with hundreds of couples, helping them to reach their retirement goals. And in doing so, I’ve seen over and over again the same basic mistakes being made. Three of these mistakes happen so often I bet you may be making at least one of them yourself. Well have no fear! Today I will highlight these three errors and show you how to fix them and hopefully live a better retirement life.
The first mistake is so common and yet it’s so critical to your retirement well-being. And the good news is you can start fixing it today and it won’t cost you a dime! OK, what’s that mistake?
It’s having only
ONE household CFO. That is, regardless of which spouse it is, you have one person handling the vast majority of the finances. You may not see this as a problem now, but it’s a huge issue for the spouse who’s left in the dark about money.
As I said, I’ve seen this mistake happen time and again with couples that I work with. Not all the time, but most of the time it’s the husband in a typical marriage that takes care of the finances. Yet a great number of sources, including the CDC will tell you, as you probably know, that women tend to outlive men by several years on average.
So if you’re a grieving widow you’re now faced with needing a crash course on your own investing, saving, bill paying and more. It’s an incredibly stressful period and it can take months, sometimes even years to finally get up to speed.
So what do we do?
Well the first thing is, have your spouse come to your meetings with your financial advisor. They don’t have to come to every meeting, I know sometimes they hate it, but they should be there at least be there once per year so that they know what’s going on. Second, be sure you both know how bills are paid and when. Which are automatically paid for from the bank account. If you have several bank accounts, which ones are paying for household maintenance and repair items, etc. Finally, create a cheat sheet with all the accounts, insurance policies etc that both of you know where to locate. Make sure it’s got phone numbers, websites, passwords, beneficiaries, all that stuff.
If you don’t know how to make one, don’t worry about it. I’ve got you covered! All you do is go to www.retirementtheory.com and you can download one for free.
OK, this second mistake catches a lot of couples by surprise
and it can have disastrous consequences if it’s never addressed.
That is, underestimating your needs as a widow(er). There are two parts that are most often overlooked. The first is that expenses as an individual really aren’t that much lower than those as a couple. Most of the expenses that are needed to run your house are fixed, whether it’s one person living there or two. And while I’ve heard a lot of times couples state that they’d really like to downsize, or they probably would, if they lost their spouse, in practice I really don’t see it happening all that often. In fact, a lot of times I see expenses increase after a spouse passes away, especially if the spouse who passed away is the one who handled household repairs or maintenance items and now that needs to be hired out. Or the newly widowed spouse might spend more time and more money on social activities or they want to go visit their family or their children more often. So a lot of times expenses actually go up.
Couple this with the fact that your regular income sources are very often going down for the remaining spouse. You have pension payments that a lot of times, they either just stop or they get reduced. And only the higher of the two Social Security payments continue. The lower one usually drops off. So it’s very important that when you’re doing your cashflow assessment, you’re doing it not just for you as a couple, but for each of you as individuals as well. An analysis like this can help determine what if any changes might be needed to be made to your financial plan to ensure that you’re taken care of for both of you as a couple and each of you for your own lifetimes.
And this notion of reduced income brings me to my final mistake that couples are making in retirement.
That is, having a poor Social Security claiming strategy. As complex as the rules are for Social Security retirement benefits, they’re even more so for survivorship benefits. I’ve seen occasions where a widow was completely
unaware of the additional benefits that were owed to them, and sometimes their children by the way, from Social Security after the death of their spouse. More frequently, I have couples claim benefits based only on their needs together, without even realizing that the timing of their own claim can affect what their spouse can ultimately receive down the road. Couples should have their claiming options analyzed across all different scenarios so they’re aware the full effects of when they claim. Consider for example, that the primary earner’s Social Security benefits generally continue for both spouse’s lifetimes, not just their own. With that in mind, it can be very beneficial to delay the claim of at least the higher Social Security benefit of the two spouses so that it can grow to be as large as possible.
So, do you have questions for me? Let me know. Give me a call at (518) 612-1060,
or just visit me at www.retirementtheory.com . Do you follow me on Facebook? I think that you should. You'll get videos like these, blog and article shares on everything retirement planning. Once again, thank you for joining me. We’ll see you next time