Remarrying after 60. It's in the details PART II
Remarrying fact: 50 percent of single Americans 65 and older will remarry. This doesn’t count those who cohabitate without marriage. Smart Money co-host Pat Boyle and I (photo) talk about how to do it right. click here.
BY JULIA ANDERSON
At a recent fundraiser, I sat next to an 87-year-old retired and widowed minister who introduced me to his new girlfriend. After months of getting to know each other at the senior living center -- and falling in love-- they happily told me that they are merging households but "keeping their financial assets separate."
Another friend who has been widowed for 12 years was this year contacted by a man she knew in the second grade…60 years ago. They had been friends then, he wanted to rekindle that friendship. Guess what! They now are an item and traveling together.
Another widowed friend runs a business with her live-in partner. They don’t plan to marry but have built a house together. Their wills spell out who gets what if one of them dies.
My mother married Howard at age 79. He was 83. They had nine great years together.
Circumstances may be different but one thing isn't changing. People can fall in love in their later years and want to share life, married or unmarried. There are steps, however, that will make it more pleasant and less risky while keeping your kids happy. I recently reviewed those steps on my show, Smart Money with co-host Pat Boyle.
For many of us who fall in love after age 60 and wish to share a hopeful future, marriage is important. We want to stand before a judge, minister or rabbi with family and friends and say, “I do” with full knowledge of what richer or poorer or in sickness and in health might mean. For others, just enjoying each other’s company is good enough.
However, a bit of long-term estate planning can make all the difference to your adult children. They may have doubts about who you are marrying or shacking up with. And they may be wondering what happens to their inheritance if you die before your new partner does. click here for Smart Money episode.
These FIVE STEPS will help avoid worry, now, and confusion later.
Step one: If you plan to marry or live together write up[ a signed and notarized prenuptial agreement that spells out what assets will be held separately by each of you. If you don’t plan to marry but want to live together, a cohabitation agreement can do much the same thing. Such a legal agreement deals with what’s yours, what’s his and what you want to own together.
For example, do you each have tax-deferred retirement funds that when you die should go to your kids rather than to your surviving spouse or partner?
Do you own real estate that will remain separate for your heirs? Is there separate debt? Shared debt?
If one of you sells a house does the house that you plan to live in together remain a separate asset? What will you jointly own such as vehicles or a vacation home that could pass to the surviving spouse?
All these questions can be answered with a prenup or in a cohabitation agreement. Hiring an attorney to help is worth the money.
Here are additional questions:
How does remarrying affect your Social Security benefits if you are collecting widow’s benefits?
How does remarrying affect pension benefits if your marital status changes?
Will you file a joint federal tax return or file separately after marriage?
Step two: Update your separate wills to align with the prenup and/or cohabitation agreement. Also designate who you would want to hold your durable power of attorney if you or your partner/spouse becomes incapacitated. Name the executor of your estate. Update the beneficiary designations on your retirement accounts. This is huge. You don’t want an ex-spouse from 20 years ago inheriting your pension fund!
Step three: If you are in your 60s, buy term life insurance on each other for at least 10 years. This coverage provides a financial cushion for a surviving spouse while the bulk of each estate goes separately to heirs. WARNING: Avoid taking on big new debt together in case one of you unexpectedly dies and his kids want their money.
Step four: Make a list of tangible assets with designated heirs for jewelry, artwork, important furniture. Explain what items you would like your new partner/spouse to continue to enjoy if you precede him in death. Spell out how you would like the rest of your separate tangible assets dispersed at your death and/or his death. This way everyone knows who gets what and when. The list and instructions will bring clarity and peace of mind as you build a new life together.
Step five: Take time after the dust settles to hold a family money meeting. Tell your children about your financial plans, your wills and who is designated with power of attorney for health care decisions and/or financial decisions. Explain the prenup or cohabitation agreement and how it will work when one of you dies. Mention the tangible asset distribution list.
(DO NOT hold this family money meeting after a holiday dinner when everyone has had a few drinks. Instead make it a separate but important meeting where everyone has a chance to ask questions, digest the information.) During this meeting listen to feedback, answer questions but stay in charge. Spell out the plan. Explain that this is how the two of you want things to be settled when one of you dies.
Revisit these plans every three years to make sure your wills and other instructions are up to date. Is Susie still the one you want in charge of your finances when you are in the care facility?
For More: Visit www.sixtyandsingle.com
Investing basics online reading:
Online resources for beginners
www.nerdwallet.com How to Invest in Stocks
www.investopedia.com How to Invest in Stocks: A Beginner’s Guide
www.fidelity.com How to Start Investing
www.bankrate.com Stock market basics: 9 tips for beginners
www.wife.org Investing and Saving
Investing basics books:
“The Women’s Simple Guide to Investing” by Elinor Davison
Motley Fool’s Investment Guide by Tom and David Gardner
“Smart Women Smart Money Smart Life” by Julia Anderson
“One Up on Wall Street,” by Peter Lynch
“A Random Walk Down Wall Street,” by Burton Malkiel
BY JULIA ANDERSON
It is one thing to save but another to invest.
Investing, however, is the only way you will accumulate enough “wealth” to have a comfortable retirement. With markets down (spring 2023) because of rising interest rates, now is the time to become an investor.
Let’s take baby steps with the basics:
What is a company?
A company is a business organization that makes money by selling goods or services. Companies can be public or private.
What is a stock?
Also known as equities or shares. If you buy a stock or a share you are buying a piece of a company. The company issues shares or stock to raise money. Shares go up and down in value depending on how the company’s business is performing. Prices go up if people want to buy more shares and down if more people want to sell the stock. It’s about supply and demand and business performance.
What is the stock market?
The stock market is a basket of stocks offered for trade in a public marketplace. Companies raise money on the stock market by selling ownership stakes to investors. These equity stakes are known as shares of stock. By listing shares for sale on stock exchanges, companies get access to the capital they need to operate and expand their businesses without having to take on debt. In the U.S. there are accounting rules for how companies operate and report earnings and distribute income.
What is a dividend?
A dividend is a reward paid to shareholders for their investment in a company's stock. A dividend usually originates from the company's net profits and is usually paid to shareholders every three months or quarters. A dividend is paid per share of stock, approved by a company board of directors.
What is compound investing?
Compounding is a powerful investing concept. It means earning returns on both your original investment and on payouts that are reinvested in more shares of the company or mutual fund.
You continue to receive returns (dividends) if you own the stock. For compounding to work, you must reinvest your returns back into more stock allowing your investment to grow.
Time is on the side of long-term investors.
Example: You start investing in U.S markets at $100 a month while in your 20s. Your average positive return is 12 percent annually, compounded for 40 years. You end up with a $1.17 million nest egg.
A friend, however, doesn’t begin investing until 30 years later at a rate of $1,000 a month for 10 years, averaging the same positive return. The friend will have just $230,000 in savings for retirement at 65. It is essential to get STARTED EARLY.
What does history tell us about American stock markets?
History shows us that stock markets are cyclical with repeated patterns of highs and lows. American stock markets have been around since the late 1700s and early 1800s. From 1871 until 2022, U.S. stocks have increased at 4.6 percent a year in value EXCLUDING dividends. If you add in dividend reinvestment, markets have grown annually about 9.1 percent a year.
What is inflation?
Inflation is the rate of increase in prices of a basketful of consumer goods over time. Inflation eats into savings and incomes by decreasing the purchasing power of money. To cool off inflation (rising prices), the Federal Reserve Bank raises lending interest rates to slow the economy. Ideally inflation runs at about 2 percent a year.
What is a mutual fund?
Mutual funds let you pool money with other investors to mutually buy stocks, bonds, and other investments. They are run by professional money managers who decide which securities (stocks, bonds etc.) to buy and when to sell them. Those are actively traded funds and usually have a higher management fee.
Other “index” mutual funds are passive funds that just follow a group of stocks up and down based on the performance of those stocks or bonds etc. Fees are lower because management is minimal.
What is a bond?
A bond is simply when you buy part of a debt. A bond is a loan made to a company or a government that can be traded on the stock market. Examples are bonds issued by school districts to build a new school building or a bond issued by a city or port district to build a road or a new warehouse. Investing in bonds is a more conservative way to invest your money:
You usually invest your money for a limited amount of time.
When the loan (bond) expires you receive back the initial amount you invested. Plus, you receive interest income on the investment.
WARNING: When interest rates are going up as they did in 2022, the value of a bond fund typically goes down. That is because no one wants to buy a bond paying a lower interest rate when they can buy a new bond with a higher interest rate.
The difference between stock shares and bonds? Bonds raise money via debt, stock shares raise money by giving investors a stake in the company’s business operation. Investors are rewarded with dividends.
Bonds pay interest. Bonds are offered with a time window, typically six months, nine months, a year, two years. You know when they will “come due.” Shares pay dividends that continue until you sell the shares or the company board of directors changes the dividend payout.
What is an EXPENSE RATIO?
An expense ratio measures how much of a fund’s assets are used for administrative and other operating costs. An expense ratio is calculated as a percent of your fund assets. Operating expenses reduce the fund’s assets, thereby reducing the return to investors over time. It can be a big factor in how much you can save and invest for retirement over time.
Fidelity’s Contrafund is actively managed and has an expense ratio of 0.86 percent. That means for every $10,000 invested in the fund, Fidelity charges $86 dollars a year.
Vanguard has a passively managed fund that replicates the S&P 500. No one is managing this fund which just goes up and down with the shares in the S&P 500. The expense ratio on this fund is 0.03 percent, which means Vanguard charges just $3 per year.
Ideally, investors are looking for funds that charge 1 percent or less per year.
Is NOW (spring 2023) a good time to invest?
Yes, especially if you are young. Start now, stick with a plan. Ignore short-term market gyrations. Put as much as you can into deferred tax plans such as a 401(k), Individual Retirement Account or a Roth Individual Retirement Account – LET THE EARNINGS REINVEST OVER TIME TO BUILD A NEST EGG.
But let’s be REAL. With rising interest rates because of inflation, we may be in for slower U.S. and global economic growth, ups and downs in stock markets and more complicated challenges for investors. Ignore all this.
Why do we need to invest, not just save?
It is one thing to SAVE MONEY and another thing to INVEST MONEY. You can save money out of your paycheck, put it in a savings account at the bank for a rainy day. Investing requires more than that.
To have enough money to retire comfortably you will need to be not just a SAVER, but an INVESTOR. That means putting your long-term savings in U.S. stocks and bonds and bank certificates that will generate income over time. The earnings from those investments must be reinvested in a tax-deferred account…. usually through a workplace savings plan like a 401k or on your own with an Individual Retirement Account or Roth Individual Retirement Account.
Over 25 or 30 years the compound reinvested earnings will build a retirement NEST EGG. The sooner you get started investing and reinvesting those earnings, the better. Don’t wait until your 30s or 40s. That makes it so much harder to get where you need to be financially.
In recent Smart Money YouTube episodes, we have covered the basics. Click here.
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