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Don’t Sign on the Dotted Line of Your Spouse’s Plan

sign hereSigning off on your spouse’s pension options without fully understanding them could cost you thousands or even millions of dollars over your lifetime.

There are many pensions in trouble today due to underfunding of their liabilities; and it has become exceedingly more common to offer employees a lump sum option. The other option is a lifetime income benefit.

Let’s look at two scenarios. We will start with a lifetime income option. John and Ellen were married for 25 years when John was offered an early retirement. John worked in the pension department of a Fortune 500 company. When he told Ellen they were going to take the single life option because it offered the highest payout, she signed off on the decision without a thought. His reasoning was that they were in their 50s and needed more income now in case he decided not to go back to work. She assumed that because he dealt with this in his job he would “do the right thing.” Whether this was a malicious decision or he thought it didn’t matter, he was later diagnosed with a terminal illness and Ellen was faced with the reality of losing $50,000 per year in income at his death. It was too late to buy insurance because he was now uninsurable. What was the cost to Ellen’s future? Assuming an interest rate of 4.25% and a life expectancy of 25 years, she lost the equivalent of $760,000 by not reviewing all the options.
spouseAll pensions are required to offer some type of survivor benefits, and they will always be a reduced amount because it is covering two lives instead of one.

More importantly, it is an IRREVOCABLE decision.

That means, it can’t be changed. I have spoken with a friend who currently works in a pension department and he said it is not uncommon for this to happen even today, when non-employee spouses are required by law to sign off if they waive the survivor benefit. “I didn’t understand” or “he didn’t explain the consequences,” are not excuses and you will not win a lawsuit and have the decision changed.
future-in-your-handsThe moral of this story – this is your financial future and though it may be “ours” today, death and divorce happen. Insist on getting a second option before making a potentially life altering decision.

In the next blog, I will discuss the lump sum option.

Should’ve, Could’ve, Would’ve

1Finances are one of the leading causes of arguments among couples, trumping children and chores!

What is it about money that causes so much strife?

Whether it is savings (too much or too little) unexpected expenses, disagreements on needs versus wants, most problems can be traced back to a lack of communication.

People think others “should” respect their needs and desires; that they “could” be more understanding, and if they “would” just agree with you, misunderstandings could be avoided. In other words, we all want thing our own way.

40things002We often project our beliefs on our spouses without giving them the opportunity to present their opinion or view on a subject.

Let me use myself as an example. When I married my husband, my daughter was attending a private catholic school. (If you read my past blogs you are aware I was deeply in debt after my divorce). My husband Kelly suggested we send my daughter to public school and put the tuition money toward helping me pay down my debt. We had a few arguments about this before we actually sat down and discussed why this was so important to me. I went to catholic schools my whole life….I attended an all girl catholic high school and felt my education really helped to shape my character, my ethics, and helped to empower me as a woman. In other words, a private education was an important part of my core values. I wanted my daughter to have an experience that would be equally beneficial and I was willing to pay for that. I had considered the cost of education as part of my plan to pay off my debt, which I successfully accomplished ahead of schedule. My husband attended public schools and received an equally good education. Once he realized why attending a private school was so important to me and he accepted it, there were no more arguments. He may not have understood or agreed with me 100%, but he was willing to accept it.

It is unfair to expect your spouse to agree with all of your needs, wants, because you think he or she “should.”

A marriage is a partnership that requires compromise and sometimes a sacrifice. Good open communication can help you to understand each other and decrease the arguments around all things financial.

compThe next time you are having a disagreement about a financial matter, and you go to that place in your mind that where you think “I wish he or she would, could or should” do something just because it is what you want, take the opportunity to pause and ask yourself why you feel this way? Consider discussing the pros and cons of whatever it is you are arguing about, and take the time to understand your partners viewpoint first.

Does Financial Stress Make Men Fat?

relax-guys-stress-kill_2010This headline from one of my financial planning journals caught my eye this morning.  According to a study conducted by AVIVA USA (an insurance company) and the Mayo Clinic, the results suggest “stress caused by finances might cause men to gain too much weigh.”

Other findings included that 2/3 of the men in the study reported they were very stressed and the biggest contributor to their stress was personal finances.  Weight gain from stress is one the many side effects of stress in our society.

Even though a high percentage of men admitted finances were the main cause, half of these men said they do not discuss their finances with others (including a spouse), and only 1 in 5 of these men work with a financial advisor.

If you are a woman who is married and thinks that your husband is “taking care of business” it might be a good time to take the lead and initiate a conversation with your spouse or significant other.   Many men feel it is their duty or obligation to be responsible for the finances of the household, including investments, even if they don’t have a clue what they are doing.  This may prove to be detrimental to his health and your financial future.  And your spouse is unlikely to admit this to you voluntarily.  Men place a lot of value on being perceived as intelligent and many men think that they “should” know how to  invest successfully to prepare for the family’s future.

My challenge to you is to find a financial planner that you are comfortable talking to and then to approach your spouse about getting a second opinion to determine if you are on track as a family.

o-MONEY-CONVERSATION-facebookI suggest you first schedule a time with your spouse to have a conversation about your finances.  Dig deep.  Ask how he feels about his investment strategy, about his job, about the amount of money that you may owe.  Admit to your spouse if you don’t understand investments and share any feelings of stress that you have around money.  Let him know it is not his sole responsibility to know everything about money or to shoulder the burden of your family finances.  Talk about his expertise in his chosen field and point out that the average person couldn’t perform his job with any level of expertise, and you don’t expect him to have full knowledge of tax, law, investments, insurance, and other complex financial topics.

You can introduce the concept of going to a financial advisor to see what areas might possibly be improved upon.  A second set of eyes can help to uncover potential blind spots.

By helping your spouse to realize that you don’t expect him to know everything about finances, you open the possibility of taking a real source of stress out of his life and improve his health in the process.

The survey findings show “there is a need for men to increase their overall health as it relates to stress, weight and their financial preparedness.”  I encourage you to find a financial planner that you are comfortable talking to and set up an appointment to get a second opinion.  By taking the initiative yourself to interview a few advisors, you become an integral part of the process and solution.  Your spouse may appreciate this more than you’ll ever know!

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Fish and Associates. Kestra IS and Kestra AS do not provide tax or legal advice.


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