A Required Discussion

This is going to be a “tough love” blog.   But when you have witnessed an issue multiple times, you have to call it, and that is the purpose of this discussion.  My intention is that you will evaluate your own situation, understand any issues, and act on them accordingly. It is only for your benefit.

  In the past few years, I have counselled a number of surviving spouses on his/her resulting financial situation after a spouse has passed.  In each case, the surviving spouse was unfamiliar with his/her financial assets and liabilities, how much money was coming in each month, from where or how it would change, once a spouse has passed.  When further probed regarding monthly financial requirements, the response from the surviving spouse was always the same – “I’m not sure. The bills were just paid”. In my latest case, the surviving spouse was not familiar with the IRA required minimum distribution rules beginning at 70½ and he/she did not request the distributions, incurring a significant tax penalty.  One simple discussion could have avoided this situation and the surviving spouse would have more resources going forward instead of handing $ to the government. Without the proper analysis and counselling, the surviving spouse in each case I counselled would have continued life as usual, oblivious to the financial facts, probably end up bankrupt, destined to become a burden to someone else.

 My experiences indicate that, In most cases, one of the spouses is in charge of the $, pays the bills, tells the other spouse everything is fine, and that’s it.  I cannot emphasize enough how WRONG this approach is as you get older.  You MUST consider the future consequences of not having an equal understanding of financial assets and liabilities and sources of income and expense. And you also must ask, what happens financially if a spouse were to pass, so you understand the resulting financial situation.  You have what you have and you need to understand how to best manage these resources going forward.

laptopTo begin this discussion, you need to make a pact that you will avoid the “We’re fine” refrain until you have proven to yourselves that you are indeed fine.  A follow-up discussion of “You’ll be fine (or not)” if I pass is also warranted.  Hard stuff, but a most essential endeavor to ensure you are aligned and understand financial reality.  Ignoring this most important discussion does no one any favors and can cause serious harm to not only yourselves, but also your loved ones.  Sorry for the dry material, but you know if you’re guilty.

 To begin, gather ALL your bank statements, brokerage account statements, life insurance statements, loan statements, credit card statements, social security statements, your checkbook, and estimates of your home’s value along with any other investments you may have, so you have a complete inventory of your financial life.  You should also investigate survivor benefits from social security, pensions, vets benefits, or any other potential source of revenue if a loved one passes. If you have completed previous planning, have all of this understood, and on a spreadsheet already, congratulations. You can begin your discussion pronto.  But if you don’t, simply gathering the docs is a HUGE first step in tackling this issue. And if you feel overwhelmed, stop right here and call in the pros.  Use someone you trust to put it all together and deliver the results.  I would also suggest that whomever you use is someone who has done this before and knows what to do and will show you what you will get from the review.   If you want to do it yourself, make sure you know how to build consecutive years of financial statements, so you understand the results and can then have the “We’re fine.” or “We’re not fine.” discussion.

 Completing this task is hard, but essential work, and will avoid potential heartache later on and also prepare you for financial shocks and unexpected events.  Most importantly, it helps avoid the “I need help” discussion with loved ones, who may be in adverse financial shape themselves. Understand your resources and your sources of income, how you are going to pay your bills, and plan your future financial life.  Consult an attorney to create wills, living wills, and estates if needed. This is absolutely essential to protect your assets and make your wishes known in advance. Doing this work is hard, but necessary to avoid the cases I have witnessed. Please, do yourself a favor and complete this work, so you understand your financial future.

 Happy Retirement!

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