When Couples Clam About Finances
By: Ellen Hoffman Source: AARP Bulletin Today Date Posted: June 2002
When was the last time you sat down with your spouse to talk about financial matters?
If you're hard-pressed to answer that question, you're not alone. A recent survey by Capital One, the Falls Church, Va.-based credit card company, finds that nearly a third of all adults have never had a conversation about finances with their spouse or significant other.
Never? "That doesn't surprise me at all," says Paula Boyer Kennedy, a certified financial planner with Joel Isaacson & Co. in New York City. "When it comes to money, what many couples choose to do is to avoid talking about it."
But experts say that such avoidance is almost certain to lead to damaging—even disastrous—financial decisions.
Just how disastrous failure to talk about money matters can be is underscored by the string of calamities that have beset many Americans recently. In addition to the human toll, the Sept. 11 terrorist attacks undermined the finances of many and generated financial anxiety among millions of others.
And the Enron debacle, which wiped out the retirement savings of many employees, made it plain that a lot of couples spend insufficient time talking about their money. "In light of what is going on with the stock market, with Enron, with plans terminating and going bankrupt, it's important for spouses to sit down and discuss retirement," says Carol Fichtelman, a pension expert with the Older Women's League (OWL) in Washington. They need to discuss, among other things, where their retirement plan is located and what type of plan it is, she says.
Such conversations, Fichtelman adds, become all the more important as people get older.
In fact, experts say, as people age, marry or divorce and change jobs or careers, their finances inevitably become more complicated. The longer they put off discussing money issues and retirement, the more likely it is that they'll encounter what Karen Altfest, a financial adviser in New York City, calls "nasty surprises."
And some surprises can be especially nasty. Kerry Hannon, the author of "Suddenly Single: Money Skills for Divorcées and Widows" (John Wiley & Sons, 1998), tells the story of a 60-year-old woman whose ex-husband had remarried. "She just assumed that the money from his pension would be part of what she'd live on in retirement," Hannon says. But when the woman's ex-husband died, she learned that his pension benefit was going to the second wife, not to her.
As a result, Hannon says, "the first wife had to regroup and start saving much more." Had she obtained some basic information about her ex-husband's pension earlier, she wouldn't have had a rude financial awakening so close to her own retirement.
Remarriage especially can throw a monkey wrench into otherwise well-laid plans. Take the case of a woman who married a retired automobile worker who was already receiving his pension benefit. In order for her to qualify for his benefit after he died, he was required to notify the plan administrator within a year of their marriage. The auto worker didn't do this, and his widow has so far been unsuccessful in her claim for the $300 a month she had counted on.
OWL's Fichtelman, who directs the group's Pension Benefits Project in St. Louis, specializes in helping people locate and claim their own or their spouse's "lost" pension benefits.
Potential income from a pension or other retirement account is, in fact, one of the most important—and complex—issues to discuss with your spouse.
"Your financial security in retirement is going to be bound up with opportunities, plans and arrangements that your spouse has made," says James Delaplane, vice president of retirement policy for the American Benefits Council, a Washington-based trade group. "Retirement plans present a series of benefits, questions and opportunities with respect to how that plan will affect your spouse."
If you have a traditional pension—one that guarantees you'll receive a specific amount of money on a regular basis—federal law requires a survivor benefit known as a "joint and survivor annuity (JSA)" from that pension to go to your spouse. The only legal way to avoid this (and get a larger pension for yourself) is to have your spouse sign a form waiving the right to receive the JSA.
Delaplane says couples also may have to decide on the amount of the pension the widow or widower would receive. A pension plan, for example, may allow an employee to choose between 50 and 75 percent of the full benefit. The larger the pension received while the employee is still alive, the smaller the survivor's benefit will be.
Unfortunately, many people don't wade through the fine print until they're ready to retire, says Cindy Hounsell, executive director of the Women's Institute for a Secure Retirement, in Washington. "Retirement is a traumatic time," she says. "You go in to sign the papers for your pension and they show you the difference between the two benefits—of course you take the higher one."
Of the big surprises, undoubtedly the worst is when a spouse dies without leaving the other essential information about financial matters. "I've seen hundreds of cases where spouses and family members have absolutely no knowledge of what someone left behind," says Thomas Murphy Jr., a probate lawyer in Maynard, Mass.
"They're forced to spend days and even weeks trying to learn about various benefits and assets," he says, "when they're trying to cope with the pain and suffering of their loss."
Couples who find it difficult to talk about financial matters might do well to enlist the help of a third party—a financial planner, lawyer or accountant, or even a relative.
Ellen Hoffman is a freelance writer in Shepherdstown, W. Va.
preview