AARP Bulletin - September 2011

Your Money ; Financially Speaking

Watch out if your spouse says, ‘Honey, I’ll take care of everything’

No Excuse for Ignorance By Jane Bryant Quinn

I hate to say it of my gender, but women of- ten don’t pay enough attention to the family money. They’re usually enabled by guys who like to manage things themselves. Both sides need to wake up. Family money is everybody’s business.

I keep hearing stories about new widows, from traditional marriages, who gasp when they realize they’ll now have to make financial decisions. And stories about husbands who lovingly say, “Don’t worry, I’ll take care of it,” which doesn’t prepare their wives for a life alone.

Even younger wives might not know about their husband’s investments or where the retirement income is likely to come from.

All too often, couples structure their household chores along gender lines—even if they both hold jobs. She does the cooking, and the laundry, handles the kids and maybe pays the bills. He decides on the insurance and investments, maintains the car and takes the garbage out. That makes no sense for either of them.

The issue comes to mind because of an email AARP forwarded to me. A woman misunderstood her coverage under her husband’s retiree health insurance (he’s in a nursing home) and mistakenly canceled the drug policy on the eve of her own cancer surgery. The company refused to reinstate her. Her children filed an appeal and, meanwhile, got her into Medicare Part D.

She recovered from the error. The company eventually reinstated her, so she is now able to choose between her old plan and Part D. Sometimes, however, mistakes can permanently change your life.

That’s why both partners need to have a broad understanding of the finances, including husbands whose wives are the family wizards. The best way of learning is by doing. You might take turns paying bills. You each might handle part of the investments. By answering the following five questions together, you’ll both be prepared.

1. What’s your annual income and what does it cost to live? The first question on the mind of a widow (or widower) who hasn’t paid much attention to money is, “Do I have enough?” It’s terrifying not to know.

To forestall this shock, you and your spouse should create a budget file. Show all the sources of income available after the first spouse dies and the current annual amounts. Subtract your expenses, including taxes. That gives your survivor a road map, showing roughly how she (or he) should be able to get by.

To get your mind around how well you’re jointly managing money today, consider signing up for one of the free money-management services online. You enter all your financial accounts—bank, investment, loan and credit card. The service tracks your income and outgo, and what your investments are worth.

2. What to do with lump sums? If the survivor will collect life insurance or an inheritance, discuss how to handle it. Attach a note to the policy or the will to help you remember the conversation.

3. How to handle existing investments? Some widows start reading financial books and discover the little secret that simple investing isn’t hard. They hold some of the money in the bank or a money fund, to help pay expenses over the next three to five years, and invest the rest in low-cost mutual funds that own stocks and bonds. Others, however, may never feel confident managing money. Husbands do them a favor by having a tested financial adviser already in place. 4. What about drug coverage, long-term care and life insurance on the surviving spouse? Discuss what to keep, what to update (such as correct beneficiaries) and what to cancel (for example, the survivor might not need life insurance). Attach a “reminder” note to each policy.

5. Where are all the financial records? Gather into labeled folders: bank records (and the key to the safe deposit box); passwords to online accounts; Social Security number; retirement plans and other investments; insurance policies; wills, trusts, health care proxy and power of attorney; loans; deeds; buy-sell agreements with a business partner; employee benefits; records of any money you’re owed; personal papers such as a marriage certificate; recent tax returns; bankruptcy records, to prevent a widow from being dunned for a debt that the court discharged; and the names and contacts of your advisers—broker, planner, insurance agent.

After a period of sheer terror, most survivors get their minds around their money. Your plan, as a couple, should be to skip the terror phase and move directly to peace. ;