transcript
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Episode #585 - Retirement Basics - What Every Spouse Should Know
One of the many magical things of having a partner is that you can delegate the responsibilities of running a household. There's so much to do. There's cleaning, there's upkeep, there's paying the bills, there's parenting, there is retirement planning.
Delegation is a wonderful thing, but in an equal partnership, if you abdicate, there could be danger ahead.
Roger: Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence because you're doing the work to lean in and rock it.
Today on the show we're starting a series, a month long series on retirement basics. We're going to cover asset allocation, building energy, fixed annuities and structured notes just to build some basic knowledge on various things I'm getting questions about.
Today we're going to talk about what every spouse should know about their retirement plan. This is actually a refresher from a month long series we did back in 2021 episodes #393 to #397 on non-planners. We're going to have links to that episode in our weekly email, the Noodle, which shares a recap of the show and resources and other things that we're noodling on. If you want to get access to these resources and links, go to thenoodle.me. and make sure you're signed up for our weekly email. In addition to that, we're going to have some in the wild stories people rocking retirement in the wild and we're trying to get to some of your questions as well.
So, let's get this party started. it's important for each spouse to delegate responsibilities. That's how we get the job done. But we can't abdicate, especially when it comes to retirement planning. About a month ago we had an internal retreat with the planners on my team to improve our process and I asked them what is most important to you that we should discuss. Erin Coe on our team, who is awesome, said, “Hey, I think we need to set the tone of what our expectation is with couples as to the participation level of each spouse because generally you have the financial manager spouse that's really into all this and sometimes you have a spouse that's really not into all this. Sometimes it could be the male, sometimes it could be the female.”
She challenged us on that and we explored it and then we came out of that fleshing out what does it mean for us to plant the flag, to set that tone with clients. I'm going to share the beginnings of our protocol that we're implementing. But this conversation led to us thinking well, there's a lot of people that doing this on their own. What should they do? What should you do to make sure both of you are on the same page, that you're not just taking on all the responsibility as the planner spouse? Let's set the tone for that.
If you're the planner spouse, that is a lot of responsibility and pressure. I've talked to so many people who say yeah, my spouse isn't really involved and I wish he would be. But this is a lot of pressure because I'm the one that has to set the goals. They don't really share with me and I have to do all the planning and the allocation and what if I mess this up? I don't want to have a bad conversation with him because I made a mistake. I wish that he would participate more. There's a lot of pressure in being the planner. On the non-planner side there is a risk of having someone else interpret what you want your life to look like, what rocking retirement looks like. I don't care how long you've been married. We all live individual lives and those lives change based on health and preferences and so forth. We need to be walking hand in hand with this, but it's best not to have what your life plan looks like be interpreted secondhand. You need to have a voice at the table. So that's why this is so important.
I have countless examples usually after the fact dealing with a surviving non manager spouse that comes to us totally lost. Countless stories of that. After our retreat, Erin shared a video of an experience that she had while volunteering to do tax returns for an organization of retirees. These videos, which are basically somebody on video, are great if you are trying to demonstrate something. We use that a lot to communicate internally. She had tears in her eyes because of an interaction of doing a tax return from someone that lost her spouse. I asked if I could share it and she said yes because I think you need to hear it. So, let's play that and then we'll get to the basics of what delegation but not abdication looks like.
Erin: I just got back from volunteering at tax aid helping seniors file taxes
Erin: Hey guys, I wanted to record this while it was kind of fresh in my mind.
I just got back from volunteering at tax aid which is where we help the seniors and low income individuals file their taxes. I had a woman come in today that brought me pretty much every piece of paper she'd gotten in the past month that had a number on it because she didn't know what she's supposed to bring. and she broke down several times because she lost her husband two years ago and since then has also lost both of her brothers.
In her own words, she is lost and she doesn't know what to do. Her husband always handled all of this for her. She doesn't understand how any of this works. She does not have a good grasp on, you know, the accounts that she has even. It's a really good reminder, like why this is important, why having both couples understand their finances and understand just like the basics, because they may not be with us forever, you know, they may leave us and go somewhere else or go on their own and eventually one of them is going to pass away and, odds are it's probably going to be the husband.
So, I just wanted to. It was such a poignant reminder of why this is important and say thanks to you guys for be willing to take this on and kind of fold it into the practice and fold it into what we do because it is really important, if they're going to rock retirement collectively, if they're both going to be able to do it. Thank you, I appreciate you guys so much.
Roger: So glad that Erin sent that to the team and gave me permission to share it on the show. You can probably hear the emotion in her voice. We saw the tears in her eyes. This is, this is life. This is important. We don't want our spouse as a manager. We don’t want our spouse to be in that position after all the work as the manager of the retirement plan, can you imagine having that be the end, result? Obviously as a non-financial planner, we don't want to be in that position totally helpless. And you notice also that her spouse died, but she lost her two brothers, so she probably lost a lot of her social network of others that could have picked up the baton in some way. That's also a danger that we need to be aware of.
PRACTICAL PLANNING SEGMENT
Okay, so we're going to start off with what participation should there be in meetings? What meetings need to happen? This applies whether there is an advisor or retirement planner involved or whether you're doing it all on your own. I think you should have formal meetings if you're doing it all on your own.
First is they need to attend and participate in all initial planning meetings to build that plan of record. I'll go through the four meetings I think you need to have when building a retirement plan of record in order to have that scaffolding.
Number one, the vision meeting. The vision meeting should start with values. These are my personal values, not our values. My personal values. You should create yours. The other spouse or partner should create their own and then you should discuss those values.
The next meeting is focused on goals. What does our base great life look like and what does that cost? Now obviously the financial manager spouse, the one that pays the bills and has some sense of the budget, can do that because they're going to be most informed. But the non-financial spouse needs to understand what it costs to live that base great life and then adding on the discretionary spending of the wants that we have over and above our base great life and setting what those goals are as specific as you're able when you're doing forward planning.
If the non-financial spouse says I want to be able to go visit my grandchildren twice a year, great. Now walk through, what does that really mean specifically? Is that every single year, what is the cost of a visit? What is the time frame of a visit? Well, the cost of a visit might be an estimate of $3,000 for each visit. We do it twice a year, so it's $6,000 and we'll do that for at least the next 10 years. So, you want to help them as the manager spouse on the financial side as they express the things that they care about.
Then lastly on the vision meeting, you want to prioritize which one of all of these discretionary spending wants is the most important. We want to prioritize them together because what might be important to you might not be important to them or vice versa. This is where we want to start to tease that out. That is the beginning of the story. You're actually building a narrative here to help both parties have an understanding of the plan. That's why both need to participate.
The third meetiong is to go through our goal package feasibility. You want to walk through what social capital you both have together. What is our Social Security? What do those payments look like? As the manager, you can do all the bird dogging and organization, but now you can help them see the story develop. We've identified all the spending based on our values, now let's see what income we're going to have in retirement. Here's our Social Security, what we estimate it's going to be when it's going to start. Here is our annuity income or our pension income and that estimate and when it's going to start. Now they can see, okay, yeah, we have to pay for this and here's some income sources that we're going to have.
Then you can move on to human capital and build it out. Remember we're going to work part time for five years. This is what our expected income is for that. They can see that picture being developed. This is like a building a story. Then you can compare now as you see our social capital or Social Security and our part time work. This is the kind of income we're going to have. But we have all this extra spending. How are we going to cover that? Now you can move on to financial capital. Here's account A. This is our IRA. This is the value of the account. This is who owns the account. This is where it's at. You can start to organize this either in a spreadsheet or software. More importantly, you can start to build the narrative so they can see the picture coming together slowly. Now we know what our money looks like, account by account, owner by owner and where it's at.
Then you can go to your other assets. This is what our house is worth, this is what our cars are worth. You can explore whether you're going to get an inheritance or not or some other payout. This is so they can conceptually see that we may have this money coming in in the future. Then you can move on to your debt, if you have any to show. This is what our debt is, this is what a net worth statement is. Both of you should build this and see this together because that builds the narrative at a very high level that everyone is capable of understanding. If it's built in the right order and we don't get down into all the tactical and technical parts of building a retirement plan. Then you can look at it, is it feasible? You know, we have these sources of income in this financial. But we have all these goals. Let's do an assessment of whether this is feasible or not. You could actually refer to some of the retirement plan live case study events and have them watch me explain what feasible means or what a, Monte Carlo scenario means, hopefully in normal language to help them build their skills. But you want them to know that this is feasible and if it isn't feasible, let them participate. What's most important to us is whether our base great life is feasible and if so, how much of our discretionary spending can we fit and which ones are most important to us. They need to have their voice there at the table.
The last meeting in the initial planning session you should have is about resiliency. Each party completes a RISA profile, which is a personality test that identifies where you're at in terms of your preference for how you get your money and how safe it is. Safety first versus optionality. It's a test that gives that because you two might not be matched, you might be all comfortable with selling things as you need them and building pie cakes. They may be 100% safety first where they need guaranteed income. That is a conversation for the two of you to have because it shouldn't be your plan or their plan. It needs to be our plan together so you both get what you need. So, you can choose that. Those are the minimums. Now, when we get into optimization, they don't necessarily need to be there all the time, this is about the initial meeting participation.
Related to that, they should attend at least twice a year a planning meeting that refreshes all of this stuff in the same order. This is our recommendation. This is what we do. At least twice a year, both spouses should participate because they're going to identify changes in preferences and in goals and in finances and exactly how you're going to create your paycheck. So at least twice a year they need to participate, at minimum.
Now let's move to what the manager spouse should do to help create or set the table for a productive meeting. I think number one, you should focus on the why first, not the how. I think of myself as the planner in my relationship. I'm all into the how. Look at this great spreadsheet. Here's a pivot table over here. It looks amazing. Let me get into the nitty gritty. You can quickly overwhelm somebody. Focus on the why first, then the how. This is a lesson I learned. You don't have to chop the onion up into a zillion little pieces and look at each cool piece. Let them peel layers of understanding, but make sure they get the big picture. Then you do this by using analogies and examples to explain the concept of vision, feasible, resilient. You avoid using targets. You equate goals to actual life outcomes, which is the point of the whole exercise. It's not the planning, it's the outcome. You can create visuals, show what's most important. Here's what we have, here's our income. Here is where it's at. Here is exactly how we're going to create our paycheck. We like to do that over five years. This is exactly how your paycheck's going to be created over the next five years. Simplify, simplify, simplify. This is something you need to do as a financial manager. There are so many cluttered closets out there of accounts and of strategies all over the place. You have accounts at ten different institutions, some private, some public. The more you can simplify your financial house, the simpler it's going to be to understand. The less moving parts there are going to be and the less opportunity for unforced errors. When you get down the optimization tactical rabbit hole and are trying to squeeze out an extra ten basis points of interest on cash, that's a mess for somebody else to clean up and it's going to create confusion. Simplify your finances as much as possible.
Now, what are some risks as the financial manager? The same risks I have in terms of the curse of knowledge. You're so far down the mastery journey at whatever level you're at than the non-manager spouse, that what you think is general knowledge is actually new to a lot of people. Make sure you're talking at their understanding level, just because this is a much more unfamiliar subject for them. You risk overwhelming them with way too much. It is much better to do it bit by bit.
Another risk to the financial manager spouse who is the main voice when it comes to retirement planning is what I call “splaining”. We can have man-splaining. We can have women-splainer. We can have advisor-splaining. Just domineering the conversation rather than listening and being curious. By doing this you are not leaving room for input because it's very easy for the non-financial manager spouse to partially get it and just nod their head because they don't want to ask a question. If you don't leave space, that can be missed. I see this all the time in meetings. It's one of the reasons why I love Zoom or online meetings actually more than in person meetings is that when one spouse is talking, I'm always looking at the other spouse and paying attention to nonverbal communication and seeing a wrinkle of the eye, a movement of the mouth or fidgeting with the hands to say, well, wait a second, there might be something there that we need to explore. We want to make room for that. We can't do that when we're just all into our numbers and showing all of the work we have done.
Okay, what should non manager spouses do?
Well, number one, take a seat at the table. Your voice is important. It's very easy to get intimidated because you have not dealt with retirement planning as much as the financial manager spouse. You don't want to ask a dumb question. Financial jargon, spreadsheets, and software can get really overwhelming very quickly. But I am here to tell you, you know so much more than you need to know. Any of the jargon in the spreadsheets and the graphs and all that is noise. You know enough about the basics of retirement planning, much more than you think. You need to take your seat at the table. You do, trust me. Express your life goals. Be willing to speak up if they're a little bit different than what your spouse understands and this can be difficult. That's why we have to have good communication skills.
One of the top five regrets of the dying is, I wish I had lived a life true to myself. Well, that implies that you have to say what you think that is. What does that mean to you? Like with Shauna and I, we go through this and don't tell her I'm talking about her on the show. With this move to Colorado, she really wants to be here, but she was able to express that she needs to be there for her mom in Texas. She was able to express that rather than let me bulldoze and just move us all here to Colorado. So now we are navigating the in between. They're just giving each of us most of what we want so we can honor her mother because it's extremely important to her, but we can honor ourselves and have time in Colorado as well. If that had not happened, we might have just been in Colorado. So, we need to be able to express our goals, ask for explanations. If you don't understand something, ask. I don't get that. Can you explain it to me in a different way? Let's pause for a second before you move on, you said this. That is a sign of intelligence. That's how we learn. Whenever we learn something new, we're always asking questions that are very basic, and having that bravery is how we learn. It doesn't mean that we're dumb and we can't understand it, it's just not something we do every day. Ask, it's okay. Take some responsibility for learning the basics. That's important. When you have these biannual meetings, there's an agenda. I know we provide the agenda in the club and we do it with clients, but we have an agenda for each meeting. Come with some specific questions and participate. Make sure that those biannual meetings or whatever frequency you need are scheduled. I would suggest if you and your spouse or partner do this without an advisor, schedule your meetings on your calendar so they just happen.
The last thing I'll say is this, which is really for all of us. Ask questions and then ask the question behind the question. It's amazing. When you dig a layer or two deeper, you start to build a lot more understanding that might not have been there in the first question. Those are some practical tips. It’s not complete, but we have limited time here.
What should the non-financial spouse know? Black and white. What should they know specifically?
If you're retired, they should understand the roadmap for the first six months without the financial manager. They should understand what things need to be done. If my manager spouse is no longer with me, they should know exactly how they are going to get their paycheck over at least the next six months, actually, I would say five years. They should know the big picture financial status. This is what our assets are. This is where they are at. These are the income sources that we have. This is the insurance that we have in place. They should know the location, the account numbers and the type of accounts. They should understand what the feasible plan of record is, what lifestyle they are aiming for. They should understand what that path looks forward in terms of the map that was created. They should understand exactly how their paycheck will be created and what account it comes from and how that operation actually happens. They should understand where their cash is and how they can access it. If you have a contingency fund, emergency fund, they should understand where that money is and how they get it so they're not scrambling around. They should have access to all the documents, tax returns, retirement plan of record, insurance policies.
Here's an important one, access to the key contacts. Who can I trust? If the financial manager spouse is no longer there, who can they turn to that they can trust at least at some level. Who is safe? That could be a trusted friend or family. It could be the tax professional. It could be a financial planner or an advisor. It could be an attorney. It could be all of those. We want to know who they are, what their contact information is, what role they play and any verbiage on how you see them fitting in so there's context to who they call for what. That's the basics. Now there may be more to that that can be fleshed out, but this is the pathway that we're going.
What should your advisor do or your planner do if you're working with one? I would argue that you could apply this to yourself if you're the financial manager spouse and you're not working with someone. Very similar stuff.
Your advisor, whoever you're working with, should avoid jargon and avoid splaining. I'm smart, I got all this figured out. You just do what I say and your questions are below me. You need to avoid that and an advisor needs to avoid doing that. What should an advisor or a planner spouse do? Be approachable. If you're working with an advisor, they should be approachable and comfortable to talk with. An advisor should be asking a lot of open ended questions and actually listening. They should be asking follow up questions. The questions behind the questions. They should pay attention to nonverbal cues. An advisor should set the tone that both parties participate. What does that mean? This is the stake in the ground that we're implementing in our practice, which is hey, we expect each partner to participate in initial planning meetings. They should ask questions during those meetings directly to the non-financial spouse to gauge understanding. They should explore directly to the non-financial spouse the wishes and signs of different viewpoints and explore those. They should expect that both spouses attend at least two primary huddles per year from a process standpoint and this is one thing that we're implementing is both spouses should be copied on core planning communication via email even if the non-financial spouse isn't participating. If it's core planning, let's include all parties. They should as a default invite both parties to all meetings. Even beyond the two huddles, the non-financial can choose not to show or doesn't need to be there for everything but they should be invited. All delivery of core planning documents needs to go to both parties separately to set the tone that this is serious stuff. We want you to have copies of these things. That is the basics of what a non-financial spouse needs to know to work towards not having the experience of the person that Erin shared with the team internally.
PUBLIC SERVICE ANNOUNCEMENT RELATED TO SOCIAL SECURITY
Quick public service announcement related to the Social Security Administration this is not related to all the hubbub we have about offices, et cetera. I don't know if you've seen some of that in the news as that settles out, because there's been backtracking, we're going to address that on a future episode. This actually is related to the WEP and GPO change that we've had. So, the Social Security has already begun pushing out payments and letters for those retirees who were previously affected by the WEP and GPO
It seems to be causing a lot of confusion with recipients. And Erin on our team says she's seen a lot of posts online and Social Security forums with people thinking it's possibly an error or even a scam. Apparently, the Social Security Fairness act just hasn't had much press coverage, as one would hope, for all the retirees that were impacted by WEP and GPO. So as a public service announcement, if you have been impacted by WEP or GPO in the past, which is related to a lot of government and teacher organizations in terms of their eligibility for Social Security, you're going to know if you have or not. We're going to refer you to an FAQ directly at the Social Security administrative site. We'll have that link in the noodle. That should answer your question so you know what is legitimate.
An even bigger concern that Erin shared was that for some folks that may have previously been told not to bother filing for auxiliary benefits because they would be totally wiped up by GPO anyway, these individuals need to go back to the Social Security administration and apply for their spousal offset or survival benefits. So, you may have been, ah, I'm not going to apply for anything via Social Security because I know it's going to get wiped out. Well, all that's gone now. I think it's a good thing to go back to Social Security to do that so that you don’t miss anything.
We'll have a link to those FAQs in this week's noodle.
ROCKING RETIREMENT IN THE WILD
Now I want to share some stories of people working to rock retirement in the wild.
Our first comes from a listener who says,
“Hey Roger,
I really appreciate the podcast and all the information you share. The challenge with decumulation is something I think about quite a bit. Having grown up in a middle class household with frugal parents, I saw plenty of accumulation that resulted in a large balance which was created with very modest levels of income. My mom has over 4 million in her investment. She could easily afford a limo service from the airport, but that would be too much of a stretch for her. So, I took a baby step and just offered to drop off her car. We have discussed her spending and she has at times spent more than I think she was comfortable with, but it's a challenge to overcome a lifetime of frugal habits.
The frugal upbringing certainly helped us in the accumulation phase. But now that we are a few years away from retirement, I am actively working on flexing the spending muscles to prepare to rock retirement.
Thanks for all you do.”
There are a couple of dynamics at play there.
One is this listener has done some work to see the value of accumulation from his mom's point of view and also the downside of accumulation habits as they've gotten older in terms of willingness to spend money. This 84 year old mom has plenty of money, but still flexes those muscles, which is not necessarily a bad thing. It's all a matter of degree. He's actively trying to help her have joy from all the hard work that she and her husband have done. Admirable thing in some cases with this mother, perhaps they're already happy. It's not about the extras. There may not be an interest, desire, or the time to overcome those habits or to moderate them. That's okay. I mean, each person their own path.
What I really like is that this listener has processed this and is working on flexing some of those muscles so he doesn't do the same thing. And this is not about spending money. This is about building a plan of record so you can have confidence to live the life you want, which sometimes involves money. So, I wish you the best of luck. It is a journey and you're on it and I'm proud of you.
KATHLEEN ON DOG-SITTING IN RETIREMENT
Our next rocking retirement in the wild story comes from Kathleen.
She says,
“I'm just catching up on older episodes in which Roger discussed possibly not having a new dog after the sad day that Sherlock passes.”
He's lying sleeping right here behind me.
“We made that decision after our last dog passed. We now travel a lot without worrying, but I have a tip in case it works for you. We dog sit our friends dogs when they are on vacation. Every month or two we have a dog visitor and get our dog fix for a while. We enjoy the dog company, but we also are happy to send them back home. Perhaps like a dog grandparent, having the dog visits enriches our lives without having to compromise our travel plans. We just had this guy in the photo arrive today.
Thanks for your podcast and all that you do.”
We will share a picture of said dog that just showed up at Kathleen's house. Great tip. I think that it is a great idea that we're going to consider once that sad day happens.
With that, let's go get to a smart sprint.
TODAY’S SMART SPRINT SEGMENT
On your marks, get set, and we’re off to set a small step you can take to rock retirement.
So, your action this week is to review the time sensitive action items that may apply to you when it comes to the month of April. April 15th is obviously the tax filing deadline or a deadline to file your extension. April 15th is your estimated tax payment deadline. We plan on having a video to talk about doing estimated taxes in retirement. We'll probably share that not this week's noodle, but the next week.
April 15th is also the deadline for prior year contributions for individual Retirement Accounts, Roth IRA accounts and Health Savings accounts. As part of that, we're going to share a resource in the noodle about do you need to start making estimated tax payments. This is a flowchart that we share in the club. If you are newly retired and not used to estimated tax payments, this will help you determine whether you need to make one. Then next week's Noodle, not this coming Saturday, but the Saturday following, we'll have a video that walks through the form and the process so you can get all that in the Noodle. So, this is time to review all this stuff. That's your action item for this week.
BONUS
Now it's time to continue the readings of Sigmund Canceller’s missions in a B-17 during World War II. This is mission number 35 and 36,
“August 24, 1944. Ship number 339, sortie 23rd. Our efforts today were spent in Prudevice, Czechoslovakia. Aerodrome really got a shellacking today. Dropped 38 clusters. There are three 40lbs incendiaries to a cluster. One burst of flak was the contribution of the tiring Germans. 8 hours 30 minutes, altitude 23,000ft.”
The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax or financial advisor before making any decisions.