Downsizing in Retirement

By: Allison Pearson

Do you and your partner share the same goals & expectations for the future throughout your changing life phases?

My son recently headed off to college. It was an important life transition, not just for my son, but for me and my husband as well. Seeing our child move out of the house and start a new phase of his life inspired us to evaluate our outlook for retirement – or, more accurately, how we would approach our next stage of life and how we envisioned living it.

The notion that the traditional definition of retirement is changing is no longer a revelation. It’s not even a remotely provocative concept these days.

We've all seen the headlines about how people are working longer because they're living longer, or simply because they want to remain active, engaged and productive. I'm personally very much on board with this – I plan to continue working into my "retirement" years, although not necessarily in the same capacity as what I'm doing now, or on the same full-time schedule.

In other words, I plan to downsize my career to some extent when I reach that point when I feel ready to shift some of my focus to other life goals, activities and interests. I think that's what I look forward to most in retirement, and how I define this next stage of life for me: It's a time to focus on whatever you choose to focus on, so long as you're able to maintain the lifestyle you're comfortable with financially.

"Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future."

My husband and I are both in agreement that, barring any physical limitations as we get older, we intend to continue working, contributing and generally remaining active for as long as possible. Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future. In other words, we're trying to develop a common vision of retirement that is both fulfilling and financially viable.

Where to Live in Retirement – The Housing Dilemma

The concept of downsizing is typically used in context with housing, of course. And as I look toward the future I (somewhat hazily) envision for myself and my husband, figuring out what will work best for us in terms of the size, cost and location of the place we call home has become a rather pressing topic. In fact, our initial conversations on the topic were my first indication that my vision of retirement was not entirely aligned with my husband's – at least when it came to housing.

Before I go into how the housing situation exposed this gap in our retirement vision, I'll give some background on the practical aspects of our downsizing dilemma.

Our situation is probably familiar to a lot of people in our stage of life. We realize it would make sense to downsize for a number of reasons – cost chief among them, but also the desire to have a smaller property to maintain. But we're also at the mercy of the ups and downs of the real estate market.

We purchased our current home 15 years ago in the midst of a classic "buyer's market" and were pleased to see it appreciate considerably since the 2008 recession as the location is very favorable and home prices in general have enjoyed a steady climb.

Now that we've reached this point and the housing market is strong, we feel we should consider selling, as it appears we're solidly in a seller's market – but are we? After all, a healthy real estate market means we have a good chance of making a profit on the sale of our current house, but as we peruse listings in the area, I was disheartened to realize that there's no way we'll find another house with a comparable value. Even the smallest houses we'd consider are now going for around what we originally bought our current house for. As it stands, we don't have the opportunity to make a profit on the sale of or current house that we could add to our retirement savings, or even make enough money so that we could have a very small mortgage or eliminate it altogether. That was eye opening!

Of course, I'm not implying that one should consider their house to be a retirement nest egg. The unpredictability of the real estate market makes that idea a very risky bet! But the Catch-22 nature of trying to buy in a seller's market is simply a complicating factor as my husband and I attempt to downsize as one of many aspects of our lives in preparation for retirement.
 

Getting back to the vision side of things, our discussions about downsizing bring to mind a time several years ago when we purchased a property in Utah. It was in a fairly remote, secluded location – more or less rural compared to where we live now.

I had always considered the Utah land to be an investment property, so it took me by surprise when I learned that my husband had always assumed that's where we would live when we retired. I told him that wasn't what I had in mind at all – I envisioned having a smaller, more manageable house but still wanted to be located in a suburban area with easy access to grocery stores and other conveniences.

"You can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be."

We have since sold the Utah property, but it's a good example of how you can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be.

How to Live in Retirement – A Shared Vision

The housing detail – while it's certainly an important one – is nonetheless a relatively tactical decision and I'm confident we'll be able to come up with a compromise that works for both of us. In fact, finding a house that's slightly more off the beaten path than I'd prefer could allow us to find something that's more affordable and gives us the financial lift we’re looking for with the sale of our current house. But we've agreed that we will not rush out and do anything unless it makes good sense. We love our home and views of the mountains and don't want to have to give that up.

Still, the fairly stark contrast between our preferences on this point opened my eyes to the larger, more philosophical question of whether we shared the same vision of retirement. In other words, not just where to live, but how to live.

Perhaps the reason it's so difficult for me and my husband – and for most couples, I assume – to find common ground when it comes to our long-term outlook is because of the uncertainty involved. Strictly from a health perspective, it's very difficult to know what we can expect to be capable of 20 or 30 years from now. It's also a rather scary and unsettling thing to think about, so the natural tendency is to block it out of your mind entirely – you can worry about it later.
 

With so much of our future unknown – and unknowable – how can we ever be sure that we're both moving toward a shared vision of retirement, or of our future together in general? For me and my husband, I think the best solution is to make retirement an ongoing conversation. It's a key piece of our future that should come into play whenever we're discussing finances, career paths, housing decisions, major purchases, and our college-aged son's financial situation and future as well.

I've written about talking with your parents about their retirement and educating your kids about money in my previous columns. And I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money. It can be a difficult thing to discuss, but having honest, open conversations with your family members can help ensure everyone is better prepared for those important transitions – both expected and unexpected – in our lives.

"I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money."

Your vision for retirement is a very personal thing. But when you're expecting to share the rest of your life with your partner, you want to make sure your visions are at least somewhat aligned. Keep those lines of communication open, and remember: the future is what you make it, so it pays to remain focused on your goals and prepared for the unexpected.

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Investing involves risk, including possible loss of principal.

Diversification does not assure a profit or protect against loss in a declining market.

This article originally appeared on https://www.jackson.com/financialfreedomstudio/articles/2017/downsizing-in-retirement.html


Allison Pearson.jpg

Allison Pearson currently serves as Vice President of the National Sales Desk for Jackson National Life Distributors LLC (JNLD). She is responsible for the Career Development Program, coordinating recruiting efforts and training and supporting the Sales Desk management team in strategic initiatives. Allison joined Jackson in 2002 as Director of Recruiting with Human Resources.

Six Financial To-Do’s (and Don’ts) of Wedding Planning

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by Stacy Francis, CFP®, CDFA

From choosing decorations and centerpieces, to deciding on the dream tailor-made dresses for you and your bridesmaids, weddings are one of the biggest and most memorable milestones in our lives. While wedding planning can be exciting, we don’t always take into account the financial toll “the perfect wedding” can have on the pockets of you and your significant other, but never fear, by following these six tips you can be financially savvy on your big day and long after!

1. Have the money conversation!
Sit down and discuss your goals, values, interests, and relationships. This will help to determine how finances will be prioritized and the roles and responsibilities within the marriage. Be sure to continue going on money dates and speak openly about finances, post-nuptials. If you are in need of further financial consultation, there are professionals who specifically meet with couples to go over conversations to create financial expectations within the marriages.

2. Open a savings account, specifically for money for your wedding, and develop a budget!
Save, save and save some more! First, you need to determine how much you can afford to spend on your nuptials. If you need to have a long engagement to stick to your budget, do it and understand the costs associated with what you want.

3. Don’t accumulate debt from financing your own wedding and don’t tap into your retirement savings
With money already a stress on a relationship, overspending on your big day could lead to deeper debt that will not be beneficial to the health of your marriage. I would suggest saving for your wedding, rather than borrowing. This can help you avoid paying the interest associated with loans and credit card debt. If you do not have the cash to pay either a loan or credit cards, then avoid financing your wedding with these payment methods. If you borrow from your 401(k), you must repay the loan within five years or else you would have to pay taxes on the amount that was withdrawn as well as a 10% early withdrawal penalty.

4. Save for the big things in life and look for bargains when you can!
When furnishing your home or saving for a first deposit on a home – it will be important to save and find some good deals when you can. When planning for your wedding, there a million ways to find exactly what you have been dreaming of as a little girl. There are plenty of DIY crafts you can use for favors, bridal showers, and wedding décor. Pinterest will be your best friend!

5. Meet with a financial advisor
A financial planner will put a comprehensive plan in place to help prepare you for all financial matters that may arise in your marriage. If you or your significant other are concerned about how financing your wedding will affect your financial future, sitting down with a financial expert can help you plan for your special day and all of the special days to follow.

6. Combining finances and keeping some separate
If after your money conversation, you find that you may have different goals, consider having a “Yours,” “Mine,” and “Ours” account. Have an account for shared household expenses and keep your own accounts for personal expenses and discretionary spending, so you can buy those shoes and he can buy those tickets for the game.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

How To Create Greater Financial Intimacy in Your Relationship

by Dr. Kristin Davin

Not all relationships require financial intimacy to function, but financial intimacy does require a deep connectedness to exist.
— Timmons

Money is a complicated topic. It’s also a main contributor to divorce. So, the early and more often couples discuss this dicey topic, the better. Discussions around money can quickly spiral out of control and become circular arguments with no end in sight. How couples navigate this conversation has as much to do with how they were each raised around money as it does with how they are currently living their lives. The likelihood that you will end up with someone whose family experiences with money are similar to yours is slim to none. Yet, it is important to remember that these experiences help shape how they perceive the role of money in their life and the degree to which they are – or are not – financially astute and responsible (Timmons).

It should come as no surprise that most couples would rather ignore the subject and pretend that money issues don’t need to be addressed (or have teeth extracted!) – and think if we “tap our red shoes three times, the problems will magically disappear” (they won’t). The only guarantee that comes with ignoring financial problems is that they will grow in size and become bigger problems –both in the short– and long–term. Some couples believe – erroneously – that talking about them only creates a larger vacuum of problems, circular conversations, and “road that leads to nowhere” – fast. But that’s the opposite of what really happens.

Yet, despite couples that are hesitant to disclose, there are ways to build greater financial intimacy even if, in the moment, it doesn’t feel that way. Taking the steps, even small ones in the beginning, will encourage greater intimacy, promote a unified relationship, and create hope for the future – together – over time . However, having these conversations is easier said than done – at least in the beginning. In theory, it might work fine, but in actual practice it feels painful, like you are crawling out of your skin.

But, despite the obstacles, with the right ingredients – effort, intention, willingness, support, safety, commitment, time, and the mindset by both parties that talking about their financial relationship is vital to keeping their relationship healthy – success is possible. Both partners must agree to be on board and make an investment in both their present and their financial future. This investment is fueled by their commitment as a couple and a belief that having these difficult and uncomfortable conversations will, over time, strengthen their relationship and resolve.

Learn here the 7 Steps To Greater Financial Intimacy

Insuring a New Marriage

Reevaluating their insurance coverage isn’t uppermost on the minds of most newlyweds, and it won’t ensure a long and happy marriage. But the right insurance can go a long way toward shielding you against the kinds of financial calamities that can strain and sometimes break a marriage. Life insurance It’s a given that couples should have life insurance if they have or expect to have children, or if one spouse earns most or all of the couple’s income. But it is often suggested that life insurance is not needed where couples have no dependents and where both spouses work in comparable-paying jobs. This may be suitable in some cases, but you may still want to consider additional life insurance beyond what is offered at work.

Working couples typically raise their standard of living: a bigger apartment or house, nicer cars, new furniture, vacations. So the question becomes, if one of them dies, will the survivor be able to afford to maintain the higher standard of living on his or her own salary? Probably not—unless each has sufficient life insurance to cover the gap.

One or both spouses may bring debts to the marriage, such as student loans or credit card debt. The surviving spouse probably won’t be responsible for debt accumulated by the deceased before the marriage (though there can be complications in this area). But the deceased’s estate would have to pay off the debt, thus leaving less for the survivor. The couple also may accumulate new debt together that the surviving spouse may find difficult to pay off without life insurance.

Life insurance may be necessary to cover funeral expenses and possibly out-of-pocket expenses incurred from medical treatments associated with the death. The advantage of getting life insurance early for many newlyweds is that they can lock in low premiums while they are young and healthy.

Lastly, while group term insurance is probably available at work, it can’t go with you if you leave your job, and is often insufficient. You’ll want to acquire additional life insurance at a time when you are most insurable.

Rename beneficiaries If either one or both spouses bring existing life insurance to the marriage, they’ll probably want to name their new spouse as beneficiary. Otherwise, death proceeds could end up going to an ex-spouse or a parent.

Disability insurance Competing with life insurance premium dollars are other insurance needs for newlyweds, and high on that list should be disability insurance. This insurance is designed to partially make up for lost wages should you be unable to work due to an injury or long-term illness. Statistically, young people are more likely to suffer a lengthy disability than to die prematurely.

Group disability coverage at work typically is not sufficient, so you may want to supplement it with a private policy. While any employee, single or married, should consider this, it becomes even more important when you have a spouse, particularly one who may be dependent on your income.

Health insurance Married working couples should review their individual health plans at work to see if they want to go with coverage under only one employer and possibly save premium dollars, or in some other way coordinate coverage between the plans.

Auto insurance Couples will probably want to insure their autos with a single company in order to get a multi-car discount. Married drivers usually can get lower rates, too, so be sure to tell your agent you’ve gotten married. Coordinating other property and casualty insurance with the same carrier can also save premium costs.

Homeowner’s or renter’s insurance While this is coverage you should get even when you’re single, it becomes more critical when you get married. For one thing, you’re likely to start accumulating more expensive possessions that you want to be sure are covered. For some valuables, such as the wedding ring, you may need to insure them with a separate rider.

Don’t overlook renter’s insurance. Newlyweds commonly live in apartments or rented houses before buying their first home or condo, yet they often mistakenly believe that the landlord’s insurance will cover damage to their personal property. Renter’s insurance is inexpensive and easy to get.

Mars and Venus - Women, Men and Money

by Stacy Francis, CFP®, CDFA

Mars may not be so far from Venus when it comes to money. According to a recent Redbook-SmartMoney Survey, most couples aren't wasting time arguing over finances and they have few clashes over cash.

One of the most revealing survey questions asked, “Is money a source of fights in your relationship?" Only 7 percent of respondents said that money is the biggest cause of conflicts, while 62 percent money is "rarely or never" the cause of a clash.

More evidence of financial harmony on the home front: Most men and women (58 and 68 percent, respectively) said that both spouses have an equal say in financial decision-making. And just because one person may earn more than the other, they don’t necessarily feel that they should have more say when it comes to spending the family’s money.

Couples do seem to be honest with each other when it comes to their financial fears. This is a new cultural shift that is revolutionizing the marriages of the 21st Century. With women, men and money – we really do seem to be getting somewhere.

Savvy Ladies’ Tip: What's the best way to keep such monetary disputes to a minimum? Know where your money's going. To cut down on conflicts about spending carefully track your purchases.

Uncover what's really behind those spats. Fights over your last manicure or his new tech gadget can sometimes be symptomatic of a bigger problem in a relationship. A good heart-to-heart can help reveal the real root of the fights.

Get your priorities straight. Taking the time to identify your financial goals is the first step towards a healthy financial relationship with your partner.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Money Talk for Couples

by Susan Hirshman

Recently I was interviewed for a story in the New York Times that focused on “money talk” for couples.  I received so much great feedback on the story that I felt compelled to address it here.

The article opens up by saying…”One of the most difficult conversations a couple can have is not about love or commitment. It is about money — how it is saved and invested and what it means for their lifestyle.”

Do you agree?

I do.  Why?  I hear it practically every time I give a talk to women and open it up for Q&As.  The questions usually sound something like this:  How do I start a conversation with my husband about money?  How do I ask my partner to see our finances without having him feel like I don’t trust him?  How do we have a conversation without fighting?

Three words here…. communicate, communicate, communicate. Sounds simple, right?  But as we all know “communicate” is not always simple – especially when it comes to money. You’d be surprised (or perhaps you wouldn’t be) by how many people don’t know how much their spouse is making.  Generally, the problem is due to the highly emotional feelings (self worth, self esteem, power, control etc) and unresolved issues with money each partner brings to the table.

So sit back and have a think.  What does money mean to you?  How does your upbringing and past experiences affect your money attitudes?  What stops you from having these conversations – fear? interest? knowledge? lack of ownership? bigger relationship problems?

Having these initial conversations may not be easy but if you don’t have them you have a high chance of becoming part of the “if only” club.  You may not know what the “if only” club is, but I am sure you know someone (dare I say more than one) who is a member.  Do you have any friends, neighbors or family who were not involved in managing their finances only to find out in times of crisis that their husband was an overly aggressive investor, or he was loaned up to the hilt, or not saving for retirement, or not protecting the family from death or disability and so on and so on.  What do you think are the first words out of these women’s mouths?  Yep, you guessed it …if only I knew he was (fill in the blank), I would have (fill in the blank.) These scenarios break my heart, because they often result in unfortunate outcomes that could have been avoided or at least mitigated, if they were only talked about.

Therefore, the question I have for you today is this:  Will you be willing to bear some discomfort today to learn whether or not your future is on a path that will give you the greatest probability of success?   As the saying goes…”just do it”

Did Chelsea Have the Talk Before She Did the Walk?

by Susan Hirshman

Even if you were busy watching "Jersey Shore" or immersed in this season's must-have beach read, you know Chelsea Clinton got married this past July.  She married Mark Mezvinsky who has a successful Wall Street career.

We heard all about the dress, her makeup, the food and the guests, but we didn’t hear anything about one of the most important aspects of any wedding – Money.  Did they have the “talk” prior to getting married, is what I would like to know.  By “the talk,” I mean how is their wealth going to be handled?

Are they going to have what’s mine is mine and what's yours is yours? Or are they going to co-mingle their assets?  Or perhaps they'll find a place somewhere in the middle – a yours, mine and ours approach.

Which do you think is the right answer?  Well, that’s a trick question, because there is no right answer here.  The right answer is the one that best fits the relationship, family dynamics and financial situation.  In reality, this can be summed up in two words:  power and control.

How much control of your assets are you willing to give up?  None?  All?  Some? For example, if you put your money in a joint checking account you are giving up a lot of control.  Why? Because once you put assets in joint name you both have rights to it; meaning that your spouse can, without you being aware or being there, withdraw all of the money from the checking account and use it as he wishes.   So let's briefly look at the three aforementioned factors – relationship, family and financial situation and ask yourself how they affect your need for a degree of control.

First:  Relationship.  What has been your history?  Are you fighters or lovers?  Will you always be that way? I hate to be Debbie Downer, but we all know the statistics – 50% of marriages end in divorce.  So do you want all your money to be co-mingled or would you have a joint account along with your own private account?

Next:  Family dynamics.  Are there yours, mine and ours children?  Is he not your first husband (or are you not his first wife?).  If you co-mingle all your assets and there are separate families, it often causes great strife between one side and the other.  For example, if your children think that your new husband is spending their inheritance, it tends not to be a pretty picture.

Last, but not least is your financial situation.  Is one spouse wealthier than the other?  Does one spouse spend more than the other?  If you work, will you continue to do so after you get married and start having children?

The bottom line is this:  the only one who can decide what is right for you is….well you.  It’s your money and your future.

Financial Foreplay: Are You Doing It?

by Manisha Thakor

Time and again money is cited as one of the top causes for fights in relationships and divorce.  One way to prevent wallet wars is to engage in financial foreplay.   But first, some basics...

What is financial foreplay? The process of getting to know your sweetie's most intimate feelings about money.

Why is it so important? As one of my favorite personal finance bloggers, April Dykman, highlights in her piece "Do Savers Seek Out Spenders?" academic studies show we are hardwired to be attracted to our financial opposites.  There is quite literally something intoxicating about "financial otherness" in the early stages of a relationship... a feeling that can (and usually does) wear off after you walk down the isle. So as personal finance columnist Ron Lieber of The New York Times wisely points out, it's important to identify your financial differences before you commit to debt do you part.  In this spirit, here are 3 fun questions you can ask your honey about money.

1.    Fill in the blank with any word except EVIL: "Money is the root of all...." This simple question reveal a lot about how you each think about money.  Some people will say "opportunity or freedom" while others will say "fights or problems."  This is a playful way to initiate a talk about how money was (or wasn't) discussed when you were each growing up.

2.    Fill in the blank:  "Rich people are..."This is another super telling question.  Some people will say "hardworking, driven" while others will say "lucky or spoiled."  This question can help you broach your feelings about saving, spending, and financial goals.  Some people want to die with their spending perfectly timed to leave $0 in their pockets while others want to live off their interest and never touch their principal.

3.    Scenario analysis - today you get $20 million & a diagnosis of a rare disease that will leave you dead in exactly 10 years.  What will you QUIT & what will you START?The most common answers I hear are quit my job and start traveling.  This question is a great way to highlight your core priorities, and make sure they are complementary.  If you love your honey "only because" she is a neurosurgeon or he is an investment banker - but her/his dream is to be a yoga instructor... you may want to talk about that!

Have you ever experienced financial tension in a relationship?

[For more MoneyZen in your life, follow Manisha on Twitter at @ManishaThakor, on Facebook at /MThakor, or visit MoneyZen.com.]

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Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.

The New Triangle Drama: Remarriage, Kids, and Inheritance

by Stacy Francis, CFP®, CDFA

It is rare that anyone cries in my office, but it did happen last week. A client reported between sobs that her dad had passed on a while back. Not only was she paralyzed with grief; she had also just learned that she wouldn’t get a dime out of his estate. It was all going to the twenty-years-younger woman he married three years ago. It felt, in her words, like a slap in the face. 

A sad story indeed, and more common than I think anyone would like. With an increasing number of people remarrying late in life, conflicts with children are on the rise – not just on a personal level, but financially, too. Unfortunately (and perhaps surprisingly), kids have very few rights in these scenarios. While it takes very little for a parent to disinherit a child, most states require that a surviving spouse receive between a third and half of the estate, at least (referred to as the elective share).

Sure, my client could make a court case out of it. Children often gain the jury’s sympathy in inheritance disputes. Unfortunately, the law is on the surviving spouse’s side.

The good news is: if you plan ahead, you can nip this ugly scenario in the bud and ensure that bereavement is the only reason your children cry at your funeral. Below are just a few ideas: 

  1. Skip the wedding altogether. Many couples who meet late in life opt to just live together, keeping assets separate and making life a lot easier for their respective children.

  2. Draft a detailed prenup. It may not be the most romantic thing to do, but it can make all the difference later on.

  3. Set up a Q-Tip trust. Q-Tip trusts are designed for this very purpose. When the parent passes on, the surviving spouse receives the income from the trust while the children hold on to the principal. Once the surviving spouse kicks the bucket, everything in the trust is paid out to the children. While Q-Tip trusts have their advantages, they can also create a lot of conflict- especially if the surviving spouse is young with a long life expectancy. Furthermore, setup costs can be substantial.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The New Triangle Drama: Remarriage, Kids, and Inheritance

by Stacy Francis, CFP®, CDFA

It is rare that anyone cries in my office, but it did happen last week. A client reported between sobs that her dad had passed on a while back. Not only was she paralyzed with grief; she had also just learned that she wouldn’t get a dime out of his estate. It was all going to the twenty-years-younger woman he married three years ago. It felt, in her words, like a slap in the face.

A sad story indeed, and more common than I think anyone would like. With an increasing number of people remarrying late in life, conflicts with children are on the rise – not just on a personal level, but financially, too. Unfortunately (and perhaps surprisingly), kids have very few rights in these scenarios. While it takes very little for a parent to disinherit a child, most states require that a surviving spouse receive between a third and half of the estate, at least (referred to as the elective share).

Sure, my client could make a court case out of it. Children often gain the jury’s sympathy in inheritance disputes. Unfortunately, the law is on the surviving spouse’s side.

The good news is: if you plan ahead, you can nip this ugly scenario in the bud and ensure that bereavement is the only reason your children cry at your funeral. Below are just a few ideas:

  1. Skip the wedding altogether. Many couples who meet late in life opt to just live together, keeping assets separate and making life a lot easier for their respective children.
  2. Draft a detailed prenup. It may not be the most romantic thing to do, but it can make all the difference later on.
  3. Set up a Q-Tip trust. Q-Tip trusts are designed for this very purpose. When the parent passes on, the surviving spouse receives the income from the trust while the children hold on to the principal. Once the surviving spouse kicks the bucket, everything in the trust is paid out to the children. While Q-Tip trusts have their advantages, they can also create a lot of conflict- especially if the surviving spouse is young with a long life expectancy. Furthermore, setup costs can be substantial.
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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Spousal IRA 101

by Stacy Francis, CFP®, CDFA

A woman approached me after maternity yoga last night. My husband is stoked about this child, she told me, and when my maternity leave is up, he would like to be a stay-at-home dad for a couple of years. I already know this means he won’t be able to keep contributing toward his 401(k), but is there another way for him to keep up his retirement savings? 

A smart question, and she should really give herself a pat on the shoulder for planning ahead. And yes, provided that she makes enough money and that they file a joint tax return, he can contribute toward a traditional or Roth IRA (income limits apply for Roth IRAs). Even if her employer does provide a retirement plan, she may also be able to contribute toward a traditional IRA (or a Roth, as long as her income is below certain limits).  

Putting her and her husband’s case into numbers, they are each eligible to contribute $5,000 toward a traditional IRA in 2009 ($6,000 if they are over 50), as long as she makes enough money to cover the contributions. If they prefer Roth IRAs, their joint adjusted gross income must be less than $176,000 (phase-out between $166,000 and $176,000).

Clear as mud, isn’t it?

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Money Management for Couples: What to Do When Your Opinions Differ

by Stacy Francis, CFP®, CDFA

Something interesting happened in my latest Savvy Ladies telephone conference. When one woman told the group that her husband’s sloppy attitude toward money was so frustrating to her, she wanted to divorce him for this reason alone, every woman in the group expressed their support. Several of the married ones even told her they could relate because they were having similar issues in their marriages.

It is no secret that “financial differences” is one of the most common reasons couples split. While sad indeed, there are things you can do to get past these issues. Below are just a few.

  1. Draft a budget. Sit down together and put your expenses and financial goals on paper. Be realistic, and make sure that sticking to the budget won’t require too much effort. Remember that budgets are like diets – they never work if they’re unrealistic.
  2. Communicate. It is common knowledge that lack of communication rarely solves any problems, yet so many couples fail to talk openly about their financial differences. Approach them in a calm, non-threatening way, and focus on finding constructive solutions that you work for both of you.
  3. Be considerate. Whether you intend it or not, the way you manage your money will affect your spouse as well. Make sure he or she is comfortable with your spending and investment habits.

If this doesn’t work, consider seeing a marriage counselor, a financial planner, or both. They can apply an outsider’s perspective to your specific situation, and hopefully find solutions that will get you past your problems. Remember, you are far from alone.

 

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The Postnup

by Stacy Francis, CFP®, CDFA

One of the main topics at my latest seminar was prenup’s younger cousin, the postnuptial agreement, or postnup. “I didn’t sign a prenup,” one woman confessed, “and my husband’s spending habits are keeping me up at night. But if I demand that we draft a postnup, he’s going to think I want to divorce him.”

A common dilemma indeed. While postnups still lag far behind prenups in terms of popularity, they do fill a crucial function. Signing one does not mean you don’t trust your partner, or that you are getting a divorce. It is simply a way to take control over your finances. If you are contemplating one, here’s what you should know:

  1. As postnups are newer and fewer cases have been tested in court, they lack the solidity of their pre-marital counterparts.
  2. Child support issues cannot be settled in postnups.
  3. There can be no skeletons in your closet, should you go for a postnup. If it turns out you failed to include (or simply forgot) any assets at the time of the drafting, the postnup will lose its validity.
  4. You only need one lawyer in order to draft a postnup, but you need two to put it into practice.
  5. Postnups can be – and frequently are – used to update prenups. This is great news indeed. As your life together changes, you are not stuck but can adapt to the new circumstances.
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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Marriage and Money

by Stacy Francis, CFP®, CDFA

One of the most common reasons women call me up is that they are dissatisfied with the way their husbands handle finances. They would therefore like to learn more, so that they can take over this crucial part of the household management. I had three of those calls just this morning!

It is true indeed that the topic of money always land near the top in surveys about what makes couples fight – and ultimately split. The good news is, much of this damage is preventable. Even more so if you address the following topics before you walk down the aisle.

  1. Financial goals. What are your expectations for the future in terms of wealth, work-life balance, retirement, etc? Don’t be alarmed if your hubby-to-be’s goals differ slightly from yours. This is normal – and natural. As long as you are aware of where your partner stands, you can make compromises that you are both comfortable with.
  2. Financial freedom. Some couples merge everything from their credit cards and bank accounts to stock trading accounts and Blockbuster cards. Others keep their finances separate to avoid fights about different spending habits. Still others keep a joint account for household expenses, and the rest separate. Find the solution that works the best for you.
  3. Existing debt. In today’s society, few people are completely in the black. A bit of debt is therefore not a red flag, as long as you can craft and commit to a plan to eliminate it.
  4. Risk tolerance. If you prefer CDs and bonds while your husband likes to speculate with biotech stocks, chances are you will end up hating each other before you know it. Find a compromise that works for both of you – and stick to it.
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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Taxes: Should You File Jointly or Separately?

by Stacy Francis, CFP®, CDFA

Even after tax season has come and gone, one of the main topics of discussion at a recent seminar was: what are the benefits versus drawbacks associated with married couples filing separately? An excellent question. However, just like with so many other excellent questions, the answer will depend on the circumstances. Below are a few examples of cases where it may be a good idea to keep this one aspect of your life together separate.

  1. You or your hubby has made little money and had lots of medical expenses. By filing separately, the proportions of the two may work out so that you or your hubby can itemize the medical expenses and save well-needed dollars.

  2. Your partner uses questionable techniques for keeping his tax dollars to himself. While tempting, such actions are illegal, and if you sign the same tax return, you, too, are responsible. If you file separately, your chances of arguing in front of a jury that you didn’t know are much better.

  3. Your marriage is crumbling. If you are fairly certain that your twosome isn’t going to last, you may want to file separately in order to minimize the paperwork you need to do together later. It is also important to file separately if you are concerned that he is not being 100% honest on his tax reporting.

Last but not least, it is imperative that you stay up to date with the newest rules and limits for the different tax brackets. Taxation is a complicated matter – but you do have options. When you add knowledge to the pot, you can make an informed decision.

Should you prepare your own taxes?

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The Prenup

by Stacy Francis, CFP®, CDFA

Over lattes today, my best friend reported that her friend was finally leaving the husband we all tried to tell her she never should have married in the first place. I am sure that you have a few girlfriends who you love in spite of their husband. Why do nice girls sometimes choose jerk husbands? Ok, I am digressing. This is a topic for another blog…

The friend was devastated by the divorce, my best friend told me, and her only consolidation was that she had made him sign a prenup.

We have all heard this story in one version or another. From A-list celebs to politicians and neighbors, divorces are far more common than we’d like to think they are. Conclusion: while drafting one isn’t exactly like a honeymoon trip to Maui, doing so may save you years and years of agony down the road. But what should be included in a prenup?

Put simple, the prenup should be a summary of how your assets (savings accounts, securities, houses, cars, investment properties along with anything else of monetary value) are to be allocated in case of a divorce. In the absence of a prenup, state laws will make these decisions for you. Though you may consider these laws favorable at the time of the engagement, they are ever changing, and therefore most people are better off settling things on their own. Not because lawmakers aren’t doing a good job – it’s just extremely difficult to generalize when each case is so truly unique.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.