Life’s short, so eat dessert first. This week we look at a woman widowed at a young age and planning the next course of her life.
The Situation
Mary Lou, 54, was widowed a few months ago, after 33 amazing years with her husband. The couple embraced their May-December relationship and made the best of their time together while Charles was here. Mary Lou continues to work full time in Colorado Springs making $61,000 and loves her job, but would like to know she can cut back in the near future. She currently welcomes the distraction of working to help her navigate through the grieving process.
Mary Lou and Charles were very smart about saving money, and Charles’ biggest concern was making sure his wife, 25 years younger, would be taken care of when he died. Mary Lou currently has $70,614 in a Roth 401(k) account, $102,035 in a Roth IRA, $264,511 in annuities, $469,247 in a brokerage account, $109,675 in a CD and $100,000 in her checking account from a rental property she just sold last week. This adds up to about $1,114,000 in a very well-balanced asset allocation. Her home is paid off, and she has no debt.
“I would love to travel and be a little frivolous, but do I have enough money?” — that is Mary Lou’s biggest concern and why she wrote in to What’s the Plan. Mary Lou envisions retirement by having $50,000 per year after taxes, and this would include being “frivolous.”
The Recommendations
We recommend that Mary Lou not make any big decisions for at least a year while she is adjusting to her new normal. The great news is her dream can become a reality! Charles and Mary Lou did an excellent job planning for the future, and if she wanted to, she could retire tomorrow and have $50,000 per year after tax to live on.
While Mary Lou is continuing to work, we recommend she continue to invest the maximum of $24,000 per year into her 401(k), but she should meet with her accountant to determine the sweet spot of investing in the Roth 401(k) or the pretax 401(k), or some of each. Now that she will be filing a single taxpayer tax return, she’ll need to adjust her tax calculations. She had been contributing to the Roth, but now the 401(k) can help her reduce her income taxes, and she can estimate her income to stay in the 15 percent bracket.
At age 60, Mary Lou can claim Charles’ Social Security widow’s benefit. As long as she does not remarry, she will also have her health insurance covered by her late spouse’s employer. Should Mary Lou decide to remarry, we recommend she wait until after age 60; otherwise, she will not be able to claim on Charles’ Social Security.
When Charles was ill, the couple met with an estate planning attorney to get all their documents in place so they could “stop talking about dying and get on with living” as she puts it. Now that Charles is gone, we recommend Mary Lou go back to their attorney and have her will and powers of attorney updated.
Mary Lou and Charles had a lot of sweet times together while they saved and invested. Mary Lou is very practical and will be able to enjoy the dessert course of her life whenever she feels ready to leave the healing routine of work.
Pam Dumonceau has 23 years of experience and is the principal of Consistent Values, a Registered Investment Advisory firm in Greenwood Village. What’s the Plan is not a substitute for financial planning or dedicated professional advice.
What’s your plan?
Ask Pam what you should do — e-mail whatstheplan@consistentvalues.com to get advice.
Names and identifying information are changed to protect confidentiality.
What’s the Plan By Pam Dumonceau
