What’s the Plan when spouses can’t talk about money? This week we look at a couple that has difficulty communicating about this important topic.
The situation
Keith, 57, has been married to Janice, 61, for 25 years. Together the couple has two grown children and four grandchildren. Colorado natives, the couple raised their family in Littleton and have paid off their home.
Keith wrote in to What’s the Plan looking for someone local to work with in his financial and investment choices. Halfway into the conversation, we discovered that he’s not single, but Janice won’t talk about money with him, so in order to keep the peace he’s taking charge of what he can. Keith would like to take care of Janice like his dad did for his mom, but struggles with some of the decisions Janice makes when it comes to finances. Their children are doing well financially on their own, although he would like to leave a legacy for his grandchildren.
Keith has saved well and has $250,589 in his 401(k) at work and $27,197 in a Roth IRA. He is saving $24,000 per year in his 401(k), $6,000 per year in his Roth and has surplus cash flow of about $2,300 per month. His career as a union employee in construction has been in demand, and he has very well paid the last few years. His base income is $50,000 per year, but last year with overtime he made $96,000.
Janice makes $20,000 per year as a receptionist. She turns 62 in a few months and is planning to take Social Security. Keith has advised his wife to wait to begin claiming and sought my advice on this topic as well.
Recommendations
What do couples fight about most? Money! It’s difficult for couples to talk about and agree about money, yet this inability to communicate is very costly.
We agree with Keith that Janice should strongly consider waiting to collect Social Security. In 2013, . As the saying goes “just because you can, doesn’t mean you should!” If Janice claims Social Security at 62 before her full retirement age of 66 while she’s still working, she’ll receive a 50 percent penalty for every dollar she makes over $15,720. Based on her income, that could mean a reduction for her of approximately $2,140 in her benefits per year!
If Janice’s earnings reduce her Social Security benefits, she has not lost this money, she has only delayed receiving it. When she reaches age 66, her Social Security income is permanently increased by the amount that has been withheld, but Janice’s benefits can grow even more if she waits until she retires to receive the income.
It was no surprise that the couple has not completed their wills or powers of attorney. We recommend Keith call his union and his employer to see if they have legal benefits that will pay for an attorney to complete their documents. Regardless of legal benefits, Keith should make an appointment with an attorney and invite Janice to join him. If she chooses not to attend, he should plan to take care of his own affairs and have his documents appropriately taken care of.
We encourage Keith to stay on his good path to retirement for nine years. If he keeps saving like he has, his retirement accounts will be in excess of half a million dollars. At age 66, our projections show that he and Janice can spend approximately $6,400 per month after tax.
We recommended that Keith open and contribute $6,000 per year to a Roth IRA for Janice, but he rejected the idea for fear of making waves, so he plans to begin contributing the $2,300 per month extra cash flow he has to a moderate-risk mutual fund where his Roth is already invested.
Keith has accepted the saying “If it is to be, it’s up to me,” and taken steps on his own to a comfortable retirement.
