Thursday, May 8, 2014

For women who marry older men: Financial planning is complicated

By now you've been together for seven years, maybe longer.
He's 70 and retired, you're 50 and still working full-time.
Or maybe you're working part-time at 40 but he's 60 and talking more and more about the golf courses in Palm Desert.
Maybe he's married you. Maybe you don't see the point of that.
He's taking Social Security benefits. You've got 12 years to go until at age 62 you first can even consider taking benefits.
Of course there are his grown children, almost as old as you are, and your grown kids. And there's the child from your second marriage, who is still at home and going to junior high.
So where is this all going? On the personal front, it's great. You're comfortable, happy.
You found in him something that younger men didn't offer...security, maturity and a calm appreciation for who you are. He enjoys your beauty, your youth and wit and the love you have for him as the anchor of your life. Likely you met at work where he was a manager, a boss, a team leader who admired your talent, who appreciated your enthusiasm, smarts and flashy good looks. You couldn't help yourselves.
Certainly he was unhappy in his marriage and ready to move on. There were painful conversations that led to a scramble to be together. The divorces were messy. Now things are settled and you're into a new life together.
You love him and care for him. He for you.
But do you ever talk about money?
Do you ever talk about what it will be like when you're 60 and he's 80, which happens to be the average life expectancy for American men, if they don't smoke or drink too much? Have you talked about what happens when he dies? About who gets what and when? Have you talked about his kids, you and your kids, if something happens.
What happens to his pension? Too late for that one since he's already taking the full amount.
Do you realize that the federal government requires that he start withdrawing from his retirement savings at age 70 and one-half. Will that money be gone by the time you might need what's left?
What happens if he doesn't die but needs long-term care at home? Where will the money come from for that?
How much debt do you have on board...a new mortgage? What about the inheritance from his parents? Of course, his kids get that. Let's say he dies at 85, which makes you 65. You could live another 30 years on your own. What financial resources do you have through your employment savings plans? Is his putting money away for you?
Did you know that if you are made the beneficiary of his nest egg and you are 10 years or more younger, he doesn't have to make as large a required minimum withdrawal at age 70 and one-half? That leaves more money for you, later.
Hazards of not planning
I'm not the first to raise these questions when it comes to May-December relationships. Candace Bahr and Grinita Wall, founders of wife.org, and others write about how a couples with a 20- or 30-year age difference face unique challenges when it comes to financial and retirement planning simply because the clock keeps ticking.
"Marriage between contemporaries is tough, but a 20-to-30-year age difference can make it a whole new ballgame," they say in their piece called Financial Planning for May-December Relationships.
The same goes for Joe Mont. "The hazards of a May/December romance go far beyond raised eyebrows or having to endure a waitress greeting you as the daughter. There is also a whole set of financial issues," he said at The Street.com. Mont points out that the older partner may retire or leave the work force, which means there's only one "working" income."The older partner may be winding down their spending at a far greater pace than the younger one," he said. "Having a much younger spouse can mean a whole new round of planning for young children. Meanwhile, one spouse is usually bringing the majority of the assets to the table, which may mean there's a lot of discussion about whether those assets are passed to their lineal decedents rather than those of their spouses."
Robert Laura writing for Forbes about "sugar daddies and cougars," said that "While the typical age gap between married couples is slightly less than four years, couples with age difference of 10 years or more have a few planning opportunities particular to their situation that they need to understand and employ."
My read on all this is that women are more often the younger person in a May-December arrangement and have a lot to lose if they don't talk about the future, about money and estate-planning.
Here's what the experts recommend:
- Marry the guy but get a prenup in place and a will that outlines the assets you are entitled to at his death. A prenup forces both of you to disclose all assets and liabilities. If you just live together until he dies, it's a lot more difficult to sort out benefits, pension money and assets. If you are married for 10 years or more, you can claim spousal benefits from Social Security for instance.
The prenup planning process forces you to think about what could happen if one of you becomes sick or permanently disabled, say Wall and Bahr at wife.org.
- Buy a term life insurance policy naming you as the beneficiary. This protects you if all his assets go to his kids, not you. That way you're not hanging out there with nothing.
- Buy long-term care insurance on the older spouse as a way to keep care costs from eating up your combined nest egg. Very little of in-home care is covered by Medicare. This is the most under-planned part of peoples' estate planning, my financial adviser friends tell me. Will you be caring for him and working at the same time? Probably not.
- Take charge of your own money. Women tend to not invest as aggressively as men. As a result their retirement investments lag in growth value. right now, your household is supported by two incomes his and yours. Put more of yours into retirement savings while you can.
- Make a list of tangible assets designating who gets what when. Does his furniture go to his kids, if he dies? What about the cars, the camping equipment? Make sure you know what happens, if something happens.
- Get your wills and health directives up to date. If he has a stroke, what measures does he want taken or not taken in terms of keeping him alive?
- Don't just sit there in a relationship where you can already see how it's going to end.
As they put it at wife.org, "One of the greatest gifts you can give to each other is settling these issues before something really bad happens." Thank god for Viagra! At least that's not a problem.

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