June 8, 2022

Financial infidelity: What it is and how to overcome it

BY JULIA ANDERSON
In Washington state there are an estimated 24,500 divorces each year, 13,500 in Oregon. That’s about 3.5 divorces per 1,000 population and higher than the national average of 2.3 per 1,000. All those divorce rates are down nearly by half from 20 years ago, but divorce lawyer Juliet Laycoe says it is not necessarily the whole picture. That’s because fewer couples are marrying in the first place. She thinks the break-up rate among couples living together with or without marriage is higher.
 
This leads us to our topic – "financial infidelity."
 
A leading cause of divorce, financial infidelity can take many forms. Not being honest about how much credit card debt you may be racking up, is an obvious example. Dishonesty when it comes to illegal drug use, or gambling addiction. Squirreling away cash is secret accounts. They all fall under the financial infidelity label.
 
In a recent Smart Money show, Laycoe related the story of a husband who was buying stuff he didn't need. To cover up the purchases he rented a storage use, filling it with computers, electronic equipment, and other items. His wife began divorce proceedings because they weren’t paying their household bills. She couldn't understand where the money was going. By looking into bank account statements the storage unit rental fees were uncovered. This led to a conversation about unrestrained spending. 
 
The good news in this case is the husband got help for his bi-polar mental condition. With medication and counseling the couple reconciled.
 
Financial infidelity is surprisingly common among couples. A survey by the National Endowment for Financial Education said a significant percentage (43 percent or 2 in 5) of spouses admitted to not being totally honest about money. It might mean hiding purchases, not disclosing a cash refund, hiding bills, or running up credit card debt.
 
“When you comingle finances in a relationship, you’re consenting to cooperation and transparency in your money management. Regardless of the severity of the act, financial infidelity can cause tremendous strain on couples – it leads to arguments, a breakdown of trust, and in some cases separation or even divorce,” said Billy Hensley president and CEO of NEFE in a late 2021 article.
 
In no-fault divorce states, especially, (where you don’t have to have a reason for the divorce) assets and debt are weighed out equally. That means someone’s secret $60,000 of credit card debt is shared equally in a divorce, as was the case of a friend of mine. While the couple may have assets of $300,000, the $60,000 in debt is subtracted from the assets. That leaves the divorcing couple to share the remaining assets.
 
Whether or not a state has community property laws in place seems to not matter that much when it comes to shared assets and shared debt in a divorce, Laycoe said. “Financial infidelity does not occur in an open and honest relationship,” Laycoe said.
 
As for unmarried couples who are living together, Laycoe recommends a “co-habitation agreement” that spells out who owns what property and who pays for what as well as who gets what in a break-up. This is similar to a pre-nuptial agreement for couples who do marry.
 
A fair financial settlement in a divorce is a huge part of the negotiation, especially for women who may face financial hardship on their own. How can a divorce attorney go about making sure a settlement in fair?
 
Laycoe said that in complicated cases where large assets are at stake, hiring a forensic accountant may be required to sleuth out undisclosed accounts and purchases, or stashed cash.
 
“In most cases it is just a matter of looking at pay stubs and account deposits,” she said. “You add up money coming in and look at where it is going. That’s how we discovered the undisclosed rental unit fees, for instance,” she said.
 
The NEFE polling showed that two out of five people were aware of financial infidelity in a relationship. “This highlights the need for greater communication and a deeper understanding of who your partner is financially,” NEFE CEO Hensley said.
 
How to prevent financial infidelity:
Establish financial transparency and trust by frequently reviewing household bills and income.
Review financial statements – bank statements, retirement accounts.
Regularly discuss shared financial goals.
Work together to achieve common financial objectives.
Communicate – share your money worries, goals.
Consider financial counseling to strengthen trust if there’s an issue.
Stay honest even if the truth will hurt.
 
For more:  
​"Overcoming Financial infidelity," click here.
"2 in 5 Americans Admit to Financial Infidelity Against Their Partner," click here.
​"How to Avoid financial Infidelity in Your relationship," click here.
"Divorce Wisdom: Smart Strategies for Anyone Contemplating or experiencing Divorce," by Juliet Laycoe. click here. 

Congress wants to help more Americans save for retirement with the Secure Act 2.0

BY JULIA ANDERSON  April 2022
Later this year, Congress likely will pass the Secure Act 2.0 in an attempt to get more Americans saving for retirement. At the same time the bill gives retirees more time to take money out.

This is a big deal because only 50 percent of American households use a retirement account. That is unchanged in the past 20 years. Even more depressing is that heads of households between ages 35 and 44 are actually LESS likely now to own a retirement account than 20 years ago.
 
The bill basics:
If passed later this year out of the Senate, the Secure Act 2.0 would expand enrollment in tax-deferred retirement accounts by offering a tax credit up to $500 to enrollees who elect to enroll in an auto-enrollment retirement savings program. The tax credit applies the first three years of participation.
 
More employers will be required to AUTOMATICALLY enroll new employees in a retirement savings plan with a 3 percent payroll deduction level that ticks up annually until it reaches 10 percent. Employees must opt out of the plan, rather than opt in. It also allows part-time workers to participate in a 401(k) plan. That would benefit many women who juggle family and a part-time job.
 
If passed, the bill would raise catch-up contribution limits for people 62, 63 and 64: The contribution limit goes from $6,500 a year to $10,000 a year for this age group. But the additional contributions must be in after-tax Roth IRA contributions.
 
The bill improves and simplifies a SAVER’S TAX CREDIT for medium and low-income households starting in 2027. This provision increases the number of people who qualify to save in an employers’ retirement account.
 
For those near retirement, the bill again raises the age when people would be required to start withdrawing money from their retirement accounts from a current age 72 to 75 by 2033.
 
Small businesses would receive more incentives for launching retirement plans. Student borrowers would get extra assistance with loans.
 
EXAMPLE: According to Forbes magazine: A married couple earning $50,000 a year and saving $4,000 annually in a retirement account would get a $400 tax credit in addition to matching money from an employer and a tax deduction on their federal taxes for the money saved.
 
OUTLOOK: Secure Act 2.0 is expected to be taken up in the U.S. Senate after the August 2022 recess and then become part of a larger end-of-year spending bill or it could remain a stand-alone bill and pass on its own.

NEGATIVES of this bill: Critics say this bill does not do enough: It doesn’t tackle why more Americans are doing nothing to save for retirement. Some see a universal coverage plan as a better solution. Something like a Social Security account for long-term savings rather than leaving it to individual employers to find account managers and set up programs. 
Meanwhile, workers can go long stretches without having access to a retirement savings plan because they lose a job, or work for an employer without a retirement plan. Also people switch jobs and take out their money. Money leaking out of existing retirement accounts is a problem. The bill does nothing to address that.

My summary touches the surface of the reform bill. For more:
Kiplinger, click here.
Forbes, click here.
WSJ "How to get Americans to Save for Retirement" - click here.
​

My 2022 Smart Women Smart Money interview with Helen Raptis at KATU's AM Northwest

​"It is never too late to start managing your money,"         Julia Anderson, author, journalist and television host. 

​A big thank you to Helen Raptis, host of AM Northwest at Portland’s KATU Channel 2 for profiling me and my newly updated 2022 book, “Smart Women Smart Money Smart Life.” Helen is such a good interviewer and gets right to the heart of things:
 
- Mistakes women make when planning (or not planning) for retirement.
 
- Lessons we learned from Covid-19 (a whole chapter in my 2022 book).
 
- Mistakes I made with my own money over my work life.
 
- Why women were hit hard by Covid-19 layoffs and shutdowns.

 Here’s a link to the interview:
 https://katu.com/amnw/am-northwest-books-authors/smart-women-smart-money-smart-life-03-01-2022
 
Thanks again to the crew at KATU's AM Northwest for arranging this interview.
JULIA ​