Sometimes it’s the $500 that one of you slipped your grown daughter. Sometimes it’s “Surprise! I paid for a cruise!” Whatever the unexpected trigger, later-in-life financial friction can be all too real.
A Harris Interactive poll revealed that fights about money are in fact more prevalent among older couples: More than one-third of couples ages 55 to 64 admitted that finances led to dustups with their spouses, compared with only 15 percent of married 18- to 34-year-olds. Part of the problem, financial advisers say, is that people don’t plan for what will happen after the “accumulation” phase of life, and they can’t agree on how to actually spend their money as retirement approaches. Or one spouse may be unprepared for the swell of emotion surrounding something such as selling the family home. Read on to learn how to resolve your toughest dough dilemmas … together.
Squabble No. 1: Honey, we've sprung a leak (and it's you)!
You’re watching your pennies and socking away funds for a retirement home, whereas your partner is doling out dollars like Tic Tacs. Sure, it's frustrating — and possibly scary. But according to New York-based financial therapist Amanda Clayman, it's not all that uncommon. “What I tend to see is one partner who is more future oriented and conservative and another partner who is more comfortable spending.” How to get on the same page: with honesty, empathy and, yes, compromise.
Get to the bottom of the binge. It may seem like your partner is throwing money around haphazardly, but there’s often an emotional reason behind his spendthrift ways. A common scenario with older couples, says certified public accountant Haleh Moddasser, senior vice president of North Carolina-based Stearns Financial Group, is this: “One person has gotten a jolt of mortality after a serious illness and doesn’t know how long they’re going to be able to enjoy good health. So they want to live for today. Their partner, meanwhile, is thinking, I may live 20 years beyond you and be left with nothing!” If you’re on the conservative side, encourage your spouse to open up about her freeness with the finances. Don’t toss around inflammatory statements such as “I can’t believe you spent this!” Instead, try a gentler tack, such as “Help me to understand why you feel this way.” Sometimes, Moddasser says, you’ll uncover assumptions that your partner has made about his life expectancy that may not be realistic.
Don’t be a silent partner. Be honest about your concerns over a spouse’s spending and come prepared with bank statements, credit card bills and receipts. “Oftentimes, we don’t have the numbers or evidence to say, ‘This is why I feel the way I do,’ ” says Megan Ford, president of the Financial Therapy Association. Stay on track by scheduling monthly check-in meetings.
Set up a slush fund. Continue contributing to your joint account for things such as home repairs or groceries, but also set up individual accounts with “free” money that you can each spend at your own discretion. “The first time I tried this with clients, the amount was $1,500,” says certified financial planner Warren A. Ward of Indiana-based WWA Planning & Investments. “He bought another set of golf clubs; she had LASIK surgery on her eyes. Neither would have approved of the other’s decision, but it worked — and, yes, they’re still married.”
Squabble No. 2: Who’s afraid of a little risk?
“We’re in the middle of the second-longest bull market in history, so a lot of people have gotten complacent when it comes to investing,” Moddasser says. But if you’re the one saying, "Why not be more aggressive with our retirement funds?" you may have a spouse who’s fretting, “This could end badly.” A lot may depend on your ages: 50-year-olds might have the time to recoup potential losses; 70-year-olds don’t.
Confront the past. A comfort with risk, like the way we view and handle finances, is often deeply ingrained. “There’s actually a study that shows we lock into our personal money patterns by the time we’re 9 years of age,” says certified financial planner Kitty Bressington of New York-based Linden Financial Consultants. Talk about how financial matters were handled in your partner’s family and in yours — how your parents saved, spent and discussed money. What you’ve each learned to accept as normal may offer insight into your sense of security or risk.
Define the worst-case scenario. A numbers-driven “What if?” can be particularly helpful for those debating investment strategy, Moddasser says. “I’ll tell them, ‘Pretend there’s a steep drop in the market that lasts for three years. If your money is invested aggressively, this is what you’re looking at. Can you tolerate that?’ ” Seeing that bottom line can help you come up with an amount of risk you can both afford — and jointly stomach.
Gamble … a bit. Ask your financial adviser to carve a small portion of your investment portfolio, move it into a separate (more aggressive) account, and assure your spouse that the rest of the money is going to stay put, safe from the fluctuations of the market. “I’ll tell the risk taker, ‘There you go. Swing for the fences,’ ” Bressington says. “ ‘If the investment grows, that's great. But if you lose your shirt, you’re done. No going back for a handout.’ ”
Squabble No. 3: The future of next-gen subsidies
You’re no longer declaring your children as dependents on your tax return, but you and your spouse may still be doling out money for their car payments, phone bills, rent and more. What can turn toxic for a marriage, experts say, is when one partner wants to keep the kids in the budget, but the other wants to suspend their borrowing privileges.
Discuss your retirement goals. It sounds like basic advice, but if you’re on the same page about what your larger savings goals are, you’re more likely to agree on how much slipping your 20-something an extra $100 now and then will do to your bottom line. “So often we look at it in a myopic way, as ‘money in’ and ‘money out,’ says Michael G. Thomas, an Athens, Ga.-based accredited financial counselor. “But you need to think about how this is impacting, over time, the wealth and security you’re trying to create.”
Have the talk. Once you’ve looked at the numbers yourselves, speak to your kids. You might say, “This is what we’re spending to help you out, and this is its impact on our future retirement.” Or, “We’ve given you $50,000, so don’t be surprised when your inheritance is less than your sister’s.” For parents who have a hard time delivering the reality check, as well as saying no, Bressington recommends letting a professional be the bad guy. “I’ll meet with the children in my office and explain what their parents are trying to accomplish financially,” she explains. “Once you lay it out, they usually realize, ‘Wow, Mom and Dad have some serious expenses.’ ”
Add strings. Sometimes there’s a valid reason for shelling out money — perhaps your son lost his job or your daughter needs to move in a hurry. “In that case, we’ll make a structured loan, just like the bank, which has to be paid back into a separate account that we set up,” Bressington says. Another idea, Thomas says, is to set up a family giving fund, as he and his wife do. “We set aside an agreed-upon amount, in terms of what we can give that year to family members in need,” he says. “If someone takes money from the account, we let them know that if they pay it back, they’ll make it possible for us to continue helping other family members.” Such a system establishes a limit to your spending and also creates a strong incentive for borrowers to refill the fund.
Present a united front. While it’s “perfectly appropriate for a grown child to know that you have different points of view” on a subject such as funding graduate school, you do have to present any gift or loan as a joint offering, Clayman says. Otherwise, you risk being played off each other or of damaging your union. “When one of you sneaks money to a family member, it causes triangulation that may undermine your marriage,” Ford warns.
Squabble No. 4: Fast-tracking retirement
A recent Fidelity Investments survey found that factors such as leisure and spending more time with family ultimately cause people to call it quits. Nice goals, to be sure, but the decision of one partner to exit the workforce prematurely can lead to stress (“How will this affect our nest egg?”) and even resentment. Indeed, another Fidelity survey revealed that nearly two-thirds of couples closing in on retirement age disagree on when each of them should wrap things up at the office.
No impulsive moves. The retirement of one of you affects you both, so you each need to be part of the decision-making process. Try to talk it through well before either of you might pull the trigger, and have ongoing check-ins on a yearly (or even monthly) basis to head off surprises.
Go a little deeper. The meaning of retirement for each person should be part of the conversation. Don’t shut down your partner by saying, “I’m sorry. That’s not possible.” Ask him to explain why he wants to retire. Maybe he’s burnt out and looking for a change of pace — or perhaps she wants to spend more time with the grandkids while she still has plenty of energy.
Do the math. Revisit your retirement plan. How does your partner's leaving the workforce change the overall scenario? What sacrifices or changes to your lifestyle can be made to compensate? That’s not a call you can make without real data, so pull out the paperwork. The numbers will tell the story: tax implications, Social Security benefits, pensions. One thing you can’t measure is the unpredictability of the stock market — or life in general. “Retirement doesn’t have to be all or nothing,” Ford says. “If you or your partner are nervous about the unexpected, consider slowly transitioning into retirement by getting a part-time job.”
Squabble No. 5: Downsize this!
For many empty nesters, the reluctance to sell what is likely their biggest asset is rooted in emotion. It’s their home — the place where their children grew up, and one filled with memories. On the flip side, there’s the time and cost of maintenance to consider, and the possibility you could free up more money in your budget while finding a design that’s better suited for your needs down the road.
Analyze the house. If you’re the one who’s reluctant to scale down, don’t let emotions cloud your thinking. Take a close, objective look at your living arrangements: You may very well be shelling out money every month on a floor plan that’s simply too large for your needs. “Spend a couple of months tracking how you use your home,” Bressington suggests. Are there rooms that you never use — a home office that’s been turned into a “temporary” storage space? A dining room that’s more or less moot? Also consider if the house is suitable for your later years. Are there stairs that will be hard to navigate? If so, a single-story home might be a smarter choice.
Try a test run. Thinking about another home is an abstract exercise with plenty of opportunity for disagreement. Standing in a new ranch or condo can make it easier to debate the specific merits of living somewhere else. If you’re stuck in disagreement, clear a few Saturday afternoons to look at different options, without any pressure to buy something imminently. “I send couples out on three months of open houses to get a clearer picture of the kind of home and neighborhood they want to live in. Then we’ll run the numbers,” Bressington says.
Get creative. “If you want to stay put, you can reduce your financial footprint by renting out a room for extra money,” Clayman says. Or rent out your home temporarily, and see if you really can live without it.
Squabble No. 6: Cracking the nest egg
The fantasy retirement means different things to different people. For some, it might include traveling overseas; for others, simply puttering around in the garden. “You each want the other person to be happy, but sometimes our ideas of how to spend our golden years can be such a visceral thing,” Moddasser says. The trick, she says, is to come up with a solution that satisfies, at least to some degree, both perspectives.
Delve into your dreams.... It’s important to understand each other’s vision — and why it matters. That will go a long way toward deflecting any accusations of frivolous spending. “A vacation home may be more than just a place to kick back,” Ford notes. “It might be a place to host and spend time with the rest of your family.”
....Then rank them. “No one’s telling you to cancel Christmas, but you do need to prioritize,” says Jennifer Failla, an Austin, Texas-based financial planner who specializes in divorce. Each of you should jot down your top five goals, listing them in the order you want to do things. You may discover some commonalities, which means your visions of a happy retirement aren’t as far apart as you may have thought.
Tweak your expectations. “It can’t be a unilateral solution,” Moddasser says. “It has to be a win-win, which means you may have to be open to scaled-down versions of what you both want. This might be taking a trip to Europe rather than a round-the-world cruise, or springing for a less-than-lavish lake house. Or you may need to get creative. “Oftentimes, the husband wants to travel, while his wife wants to spend time with the family,” says Ford, who adds that travel with the family might be a solution. If you want to buy a vacation home but your partner thinks it’s too big of an expense, try renting a home in the Caribbean for a month. Ward and his wife employ the “you, then me” approach: “We allow for some fun discretionary spending every year and take turns deciding how to use the money.”