AN expert has offered crucial advice to a retiring couple where one person has no savings and the other has a net worth in the millions.
Wondering how to optimize their money for the long haul, one partner, 56, said she’d been particularly successful, gathering a net worth of $3.4 million.
The cash is spread throughout liquid funds, investments, and home equity, according to what she told MarketWatch in a recent conversation.
She noted that there is also no credit card debt to speak of on her end, and she’s paid for college tuition for her kids but is “writing the last check” at the end of 2024.
The only debt incurred is the mortgage on her $800,000 home, which is set at $325,000 at a 3.5% rate.
Everything else is also seemingly in order for the 56-year-old’s retirement plan.
“I recently married and have a prenup, trust, will, and other related documents,” she said.
While everything would appear to be set up for a smooth retirement process, she added that her husband, 64, is in a different situation while also being semi-retired.
She noted that he’s already taking Social Security payments every month at $1,400 per check and doesn’t have any cash set aside for the years ahead.
“My spouse who is 64 is also semi-retired, and already receives a Social Security widower’s pension of approximately $1,400 a month,” the woman said.
“He has no savings to speak of.”
The pair created a system where expenses are about $9,000 every month, and they pay for those costs using income from the 56-year-old’s small business and the 64-year-old’s part-time work.
Still, they wanted to know from the experts at MarketWatch if they were spending too much and if they’d be able to use the 56-year-old’s hard-earned net worth to last the rest of their lives.
The expert first applauded the woman for her success in business and being able to balance everything on top of the full-time job of being a single mother.
They also reassured her not to worry about the mortgage debt given her situation, as it’s never typically considered “bad debt,” especially with no other debt to speak of.
With everything taken into consideration, there were two key things the couple needed to do to retire comfortably and how they wanted, according to the expert.
WRITING IT ALL DOWN
First, the expert said they needed to break down their “cash inflows and outflows.”
This would begin on a month-to-month basis, and then grow to yearly and more long term expense goals.
“Write down all the absolute necessary expenses you spend within the month — the mortgage, utilities, taxes, insurance, groceries, and so on — and compare that with your monthly income,” the expert wrote back to the couple.
They also advised the couple to break down large bi-annual or annual expenses into monthly costs.
That way, they can set aside money ahead of time so those payments aren’t as intimidating by the time they roll around.
“When I have bills that are bi-annual, I like to split the total cost to see what it would be as a monthly expense,” the expert noted.
“For example, if you have an auto insurance bill for $1,200 every six months, that would be $200 a month.”
“I then write down my monthly budget as if I were paying it because I hate paying a big bill when I know that it is something that I can plan ahead for instead,” they continued.
The monthly cash inflow and outflow breakdown would also include expenses they wanted to spend on but didn’t need to, unlike bills or other necessities.
Then they could already have that pre-budgeted and know that they really wouldn’t have to spend the money on it, but could feel free to do so if they like.
“Next, add the monthly expenses for things you truly enjoy — memberships to the gym or golf courses, subscription services, your weekly trip to the local cafe for your favorite latte,” the expert wrote.
” No, you don’t need to spend that money, but you’ve worked hard for your money, and you should be allowed to enjoy yourself with it.”
UNEXPECTED FUND
The second major tip the expert offered the couple to ensure they had a smooth retirement was to take that cash inflow and outflow breakdown and add another section for unexpected purchases.
“Even if you’ve amassed a small fortune, you never know when the unexpected could happen,” they said.
“Having as much extra cash as you can to protect yourself and your family is a blessing.”
When considering the additional savings set aside for the unplanned, the expert encouraged the couple to ask themselves several questions.
They included more information on when the husband’s widower’s benefits might end, if the 56-year-old might move away from her small business at any point, and when the last mortgage payment is for the $800,000 house.
Although, the biggest question for the couple was how their current expenses compared to their future anticipated income.
“Do you feel comfortable that you’ll be able to sustain your current lifestyle with what you expect in income outside of your retirement savings?” the expert asked.
They recommended that the couple “get comfortable” talking about everything financially for a successful path to retirement.
For more related content, check out The U.S. Sun’s coverage of a 60-year-old with nothing saved for retirement who was given a key work solution by an expert.
The U.S. Sun also has the story on a “million-dollar decision” a future retiree needed to make at 62 before quitting their job.