When only one spouse wants to handle the money

Getting a reluctant partner involved in retirement finances may be hard, but it is crucial.

  • By Glenn Ruffenach,
  • The Wall Street Journal
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Q: My wife and I are recently retired, and I have always taken care of our household finances. I’m trying to get her more involved in money matters and how our nest egg works, but she has little appetite for this. Any thoughts? Any recommendations?

A: You certainly have lots of company. In many households, one person pays the bills, manages the money and oversees planning for retirement. And just as often, that person’s spouse is more than content to remain financially detached.

The problem: Ignorance isn’t necessarily bliss.

The risks of one person holding the reins should be obvious: If the spouse handling the retirement finances becomes incapacitated or dies—or if you and your spouse should divorce—the person who’s been left in the dark could be hard pressed to manage successfully a host of issues, including budgets, investment choices, taxes, withdrawals from nest eggs, Social Security, health insurance, estate plans, etc.

Unfortunately, many couples are entering later life in just this fashion. Frequently, the victims are women.

Indeed, a study published in March by UBS Global Wealth Management found that more than half (54%) of surveyed women in the U.S. said their spouse takes the lead in making “major financial decisions.” Among the reasons why women opt out: 88% said, “I think my spouse knows more than I do.” And 76% said, “I’m not interested in planning and investing.”

Believe me, I’m glad your wife (apparently) has faith in your financial skills. But when it comes to your nest egg, a little less faith, and a little more sharing, would be good for both of you. Beyond the basics—knowing where documents like wills and powers of attorney are kept, as well as the passwords for all accounts and electronic devices—both you and your wife, at a minimum, should be aware of:

  • The location and size of all retirement accounts, investments and insurance policies.
  • What funds, if any, are being directed to, or withdrawn from, retirement accounts and other investments.
  • Whether beneficiary forms have been filled out for all accounts and whose names are on these forms.
  • Any and all debt.
  • How much money might be available from Social Security.

I also would urge your wife to become familiar with the Women’s Institute for a Secure Retirement. This Washington-based educational and advocacy group seeks to improve just that: the long-term financial quality of life for women. Invaluable.

Q: I am 63 years old, divorced and collecting Social Security benefits based on my former husband’s earnings. There is a possibility I will remarry. If so, will my benefits stop? Do I need to notify my Social Security office if I remarry?

A: Yes, the burden is on you to notify Social Security. And yes, you would stop receiving benefits.

A divorced spouse who wishes to apply for benefits based on a former partner’s earnings, in addition to other requirements, must be unmarried. That fact allowed you to begin collecting Social Security benefits on your ex-husband’s earnings record.

So if you remarry, after starting to collect benefits, you are responsible for notifying the Social Security Administration about changes in your marital status, says Darren Lutz, a public-affairs specialist with the agency. “Failure to do so timely,” he adds, “could result in an overpayment on your record, requiring you to repay any benefits that you aren’t entitled to.”

If you do remarry—and if your second marriage ends (whether by death, divorce or annulment)—you could, at a minimum, reapply for benefits as a divorced spouse based on your first husband’s earnings. The length of the second marriage would help determine whether any other benefits would come into play.

Q: I’m considering buying a longevity annuity. What are your thoughts about these products? I’m in good health and expect to exceed my average life expectancy.

A: Sales of these annuities, sometimes called “longevity insurance,” are increasing, but whether this product is right for you depends on several factors.

The proper name for this type of annuity is a deferred income annuity, or DIA, with the emphasis on “deferred.” A regular immediate annuity begins making payments soon after you buy it; a deferred annuity’s payout typically begins 10 or 20 years in the future.

Through the first six months of this year, DIA sales totaled $1.4 billion—a small share of the overall annuity market, but a 25% increase from a year earlier, according to Limra, an industry-funded research firm.

The primary advantage of a DIA is as much psychological as financial. Many people worry about how markets will perform during their retirement years and whether their nest egg will expire before they do. A DIA, with its guaranteed paycheck in later life, all but removes these concerns from the table (depending on the health of your annuity company).

The disadvantages start with control, or the lack thereof. As with many traditional annuities, a person who buys a DIA gives up control of the premium. If you need the funds for some other purpose—or if you die—before payments begin, you’re out of luck. (In some cases, you can buy a rider that provides for the return of premium in the event of an early death.)

What’s more, inflation protection can be problematic. Inflation-adjusted DIAs typically apply only after income begins. Translation: Good luck in figuring out what inflation rates might look like in the years before your annuity payments start and just how large your payouts need to be.

If you’re considering buying a DIA, the pros and cons—as well as ideas about how a longevity annuity might fit into a retirement portfolio—are summarized nicely in an article by Michael Kitces, director of wealth management at Pinnacle Advisory Group in Columbia, Md.

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