Talking about money is hard. It might be the only remaining taboo. Couples who discuss almost all aspects of their personal lives often clam up when it comes to discussing their finances. According to this 2018 survey, more than one-third of married couples say money is the biggest stressor in their marriage.
Why does this happen? Lack of education plays a role. Most schools do not offer courses on personal finance. Many families don’t talk about money with their kids. That leaves us with little experience to draw on. As a result, we may not know what to say or talk about. We may not even know how to start the conversation.
We know we should save money for our future. Those who have kids may want to help pay their college costs. Most of us will stop working someday. We should save for retirement. These long-term goals should be balanced against our desire to experience life today. We work hard and deserve some time off. That means the occasional vacation or night on the town. Maybe not this year because of the pandemic, but we expect to enjoy those experiences again at some point.
Oftentimes couples don’t feel the need to talk much about finances when they get married or decide to live together. Household responsibilities get divided. One spouse often has the primary responsibility for taking care of family finances. The other one knows that the bills are paid. They may some savings accumulate as well. But little consideration is given to setting goals or the future. We don’t feel much urgency to worry about a future that seems a long way away.
Time passes faster than you can imagine. I find it hard to believe that my wife and I celebrated our 25th anniversary earlier this year. Our oldest of four children graduated from college in May 2019. Number two is a sophomore. I remind our kids that parents say lots of things to their kids. Most go in one ear and out the other. I tell them that if they only listen to one thing, it should be my reminders about how fast time goes.
So much happens in our lives. Time passes quickly. We worry about the future but do little to prepare for it. One day it dawns on us that we will become empty nesters before we know it. One spouse starts to worry about retirement and what it will look like. But the other spouse has always taken care of everything. Life seems comfortable. Nobody wants to stir the pot. A conversation that needs to happen is avoided.
When we are working, we accumulate assets. We generate regular income. We save for the future. Oftentimes, we save in a company retirement plan like a 401(k). We have a limited number of investment options. We might settle for a target-date retirement fund that approximates our expected retirement date.
When we retire, we shift to the decumulation phase. We start spending down the assets that we accumulated. For most of us, the regular paycheck disappears. We count on Social Security income at some level. For most, that isn’t enough. How do we generate a retirement paycheck? If we have saved in tax-deferred retirement accounts such as IRAs or 401(k)’s, we have to pay taxes when we withdraw the funds. Believe it or not, our tax bill in retirement can be higher than our tax bill was when we were working.
In other words, the approach changes in retirement. Our focus moves from tax-efficient saving to tax-efficient withdrawals. This change requires a different thought process and knowledge base. How can we withdraw money from our retirement accounts in a tax-efficient way?
Of course, our questions should go beyond the financial issues. We also must address questions such as the following:
· Where will we live in retirement?
· What will we do when we retire?
· What kind of lifestyle do we anticipate?
· How do we prioritize among numerous options?
· What happens if one of us becomes sick and needs more care?
· Should we seek some professional help navigating through these questions?
How do you start the conversation? What questions do you ask? As an advisor, I regularly have conversations with clients about these issues. I also help them understand why money is important to them. It can make it easier to prioritize their options.
If you’d like to start the conversation on your own, please click this link. When you do, you will be asked to provide your name and email address so you can download a questionnaire. It includes 11 questions you can discuss with your spouse and get the conversation started. You can print a copy if that’s easier. I recommend you and your spouse have this discussion when you’re free of distractions. Perhaps as part of the conversation during a quiet dinner. Maybe after the kids have gone to sleep.
Planning involves thinking ahead. This applies to our finances, too. When should you start working on your financial plan? The sooner the better. The file you can download can help you get started.
After you discuss the questionnaire with your partner, I invite you to take the next step. I am giving away free, 30-minute Strategy Sessions to the first 5 people who sign up. All you have to do is click this link to schedule some time on my calendar.
If you would like to discuss your financial plan or any other issue related to your personal finances with us, please complete our contact form, and we will be in touch. You can also use this link to schedule a phone call or a virtual meeting.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
