By Alessandra Malito
Please help me. I am a 68-year-old woman married 17 years to the love of my life. Our finances have always been separate, and I signed a prenuptial agreement acknowledging that his son will inherit his estate held in a living trust (about $3 million). I get our home, and he is leaving me $350,000 in his will.
The husband took a lump Social Security payout before we met. We have always lived debt-free, and I have a nice 2020 vehicle. While I live a modest lifestyle, his health has prevented us from enjoying a vacation for eight years. I am eager to travel more in the future. My husband is terminally ill and will likely live only another year or two. His medical bills are not my responsibility.
In 2019, we built a new home. Although its exact value is unknown, I will probably clear about $800,000 for this asset, expecting I will purchase a smaller home upon his passing.
I get Social Security and a pension, and now collect about $20,000 total annually. I have been an ambitious saver and now have reached about $350,000 earning good money on my mutual funds. Other stock is worth about $20,000, and I have a 457 account worth $65,000. I have $60,000 in savings and $20,000 in checking currently.
I have never removed a dime from my investments, and doubt much will change that would necessitate this until I am alone. My husband pays our living expenses now. My goal is to enjoy the remainder of my life, leaving as much money as possible to my four siblings.
Sounds pretty good to me, but I have been taking risks holding my savings in stocks to earn an annual realized return of more than 15% in the last decade. And I do not have long-term-care insurance.
Can I expect to live out my life in good financial health?
I am so sorry to hear about your husband’s illness. That is such a difficult experience to live through. I am glad to see you are planning for your finances after he passes — that will save you a lot of headaches along with the heartbreak, and give you stability and security in your older age.
To get to your answer, you’re going to have to do some serious analyzing of your current and expected future expenses. Keep in mind, though, anything can change in a few years, or even a year, so be flexible when you map out your finances for the future.
First, develop a plan (some might call it a budget), said Robert Gilliland, managing director and senior wealth adviser at Concenture Wealth Management. Take into consideration every single possible expense you anticipate after your husband dies, and account for inflation as well. You can break these expenses down into the short term, such as one to five years, the intermediate term, which would be the six- to 10-year span, and the long term, or beyond 10 years. Include your projected housing expenses, and perhaps plan for whether you stay in your current home or find something smaller. Also think about healthcare, which is a major potential expense in any retiree’s budget; utilities; emergency expenses; the occasional meal or entertainment; and so on.
After accomplishing this analysis, look at what your expected income sources are. You mentioned Social Security and a pension, and you may take regular withdrawals from your investments. Compare your income to your expenses. “Once you have that number you can determine what a ‘reasonable’ withdrawal rate is on the assets to determine excess funds available for travel,” Gilliland said.
A note about your investments: Advisers use this bucket approach with investments, in which case it is common to see intermediate- and long-term needs invested with more risk. You mention your savings are taking on a lot of risk right now, however, and you should consider speaking with a financial adviser — even one where your money is housed — to see whether that is the right asset allocation for you. If you’ll be living on a fixed income, you can’t afford to lose too much in your portfolio. Diversification and proper allocation will be keys to your success. “At the end of the day, being able to ensure funds will be available to meet her needs should be most important,” Gilliland said.