Episode 14: Common Financial Mistakes Couples Can Avoid in Retirement

Isaac Wright: Well, hello, everybody. Welcome to Wright Money Tips. We’re going to have a great conversation today related to some pretty important things. If you’re married, if you have a spouse and you’re trying to figure out the game plan around your financial affairs, we find some significant mistakes are unfortunately being made with spouse communication and various aspects of your financial plan that we want to make sure that you don’t have that happen. Our guest today, Ricky Lafon, if you haven’t met Ricky here at office, Ricky is with me now and you are the leader in the clubhouse with being on the show.
Ricky is our CFP® senior advisor professional here at Financial Dynamics. But the topic today, just to be clear is mistakes that couples need to consider avoiding when developing their financial plan. And Ricky, when you think about all the people that we’ve talked to over the years, I think the topics we’ve laid out today are going to be hit, I think simple, but really hit hard relative to some mistakes we see that can’t be corrected if it’s too late.
Ricky Lafon: That’s exactly right and I’m excited to get started talking about these. You know, no matter what clients that we have the opportunity to serve, it all boils down to just a handful of mistakes that people can make on their own that really come into the picture and we can assist with.
Isaac Wright: Well, let’s go and get off the ground here for all of you today. The first topic of conversation, if you’re married or have a spouse, is when it comes to your retirement plan is not taking into consideration when you are going to collect your social security. And I’m also going to throw another one at you. How or when to collect your pension options.
So, Ricky, I’m just going to leave that open-ended. Why don’t you share some of the things that we’ve done and we’ve seen that have been both pros and cons around social security and pension collection option.
Ricky Lafon: A couple of things we have to consider is with your pension and with your social security, you’re going to have a couple of different claiming options. Everyone’s situation is going to be a little bit different. But one thing that we find is if you do have a pension, if you’re one of those fortunate few that has a pension plan available, maybe that’s an area where we can delay social security, build that social security income for your future and use as a hedge against longevity for the person’s future.
Isaac Wright: I think with social security too, the decisions around that have been somewhat simplified, but there’s still some cards on the table about when to collect. A lot of us today, if you ever watch and obviously for those even if you don’t watch, you can see the cost of everything around you keeps going up.
Social security currently under the way it’s set up now, still has costs of living adjustments. So therefore, it could potentially mean that by waiting to collect your social security, you’ll have a larger check for your life and actually get a larger inflationary adjustment on your social security. Of course, we’re going to see how those rules play out coming up for the next few years.
But let me just say this, Ricky, I think with social security, you are correct. I think a lot of times people would just rush in, unfortunately, make decisions about just collecting that monthly check, whether they believe in the government or whatever that is. But the pension option, the pension option is something that we find, unfortunately, sometimes again, gets rushed into whether or not they need to have a portion of that pension go out to their surviving spouse, if something happened to them, weighing whether or not they want to take a portion of that pension and maybe purchase life insurance. But you know, I think with what you and I talked about before we came on, basically with a pension, the main thing I think is that people are just not having those kinds of conversations.
Anything you want to add to the pension part? Because people still have pensions that are walking in the door here with some of the local employers and people that we’ve worked with.
Ricky Lafon: That’s exactly right. A lot of times when you have a pension point available to you, you get a benefits package. That’s typically emailed to you, mailed to you. Bring that to us, let us review that, get to know you a little bit, and we can walk you through the pros and cons of taking that. Like what you just said, “Do we want to take care of a spouse? Do you have longevity?” Some situations you can even collect that lump sum if you don’t have longevity in your family. So, everyone’s situation is a little bit different and we need to plan.
Isaac Wright: Yeah, well, listen, I don’t want to take all of our time on social security and pension options. If you have any concerns about those, again, especially if you’re financially looking at your game plan, heading closer to retirement, we’re here to help.
Ricky, let me take this in another direction. Non-financial related, just a conversation around lifestyle. It’s amazing to me sometimes where couples don’t communicate about certain things that they want to see happen in their lifestyle. You have one spouse that may want to travel the other one doesn’t. But let me just say this, this is a mistake, simply not having a conversation about the goals that you’re trying to obtain after you retire.
Speak to me a little bit about that. If you’re a couple and whether or not from your perspective, has that been hindsight 2020? Has that been something that’s been impactful for people we’ve spoken with?
Ricky Lafon: Yeah, absolutely. We go back to the old saying, you know, communication is key. So, when we sit down with a couple, one person may want to travel a little bit more than the other. There may be a major purchase coming down the pipeline. They may want to continue being charitable. They may not have had that conversation, but it’s our job as the advisors and as the fiduciary to sit down and start that conversation. And that conversation can last for a couple of different meetings with us, but we have to get ahead of that so that we have that information to do as good of a job as we can and planning for that custom retirement plan that we create.
Isaac Wright: Well, and I think too, you’re going to find a lot of couples do have different goals in terms of their time and their energies that they want to apply to wherever they want to go and whatever they want to do in retirement. That could also be economically very different too.
So, for all of you, again today, if you, and especially, let me just kind of talk to you about this for a second. One of the things that we really pride ourselves here at our firm is to really develop a lifestyle plan. You know, money is simply a tool that will allow you to extrapolate whatever you want to do in retirement. Whether or not you can or can’t, that’s our job to help guide you. But don’t go through a retirement situation upcoming where you don’t even talk about what you want to do. Let me just kind of move on here.
The third thing I want to cover is when it comes to a spouse. When it comes to a couple and whether or not you’re taking the time to coordinate your financial affairs like with an IRA. A lot of you out there have 401(k)s, you’re in a situation where you have a combination of investment accounts and especially, I do want to say this, especially if it’s like a second marriage, sometimes you become a little bit closed off financially about what you want to do with your spouse and sometimes that’s not the case. Don’t get me wrong, but you have to have a reasonable amount of communication around the amount of money that each one has. So you understand, especially if you filed jointly. What in the world you’re doing when it comes to your overall taxes and your money?
Ricky Lafon: Yeah, that’s exactly right and when we talk about all the different types of accounts, let me throw out an example. You may have a couple that has a 401(k) and an IRA and they’re getting up in age and now required minimum distribution starts coming into play. Now that just got changed. It’s at age 72 now, but a 401(k) and an IRA, you’re going to have separate required minimum distributions. Can we roll those together into an IRA to help manage those required minimum distributions? And that’s part of our job is to help manage the overall financial plan moving forward and to bring some simplicity and clarity to the picture.
Isaac Wright: I think overall, getting a household view of assets, if that’s not being accomplished, that’s doing you a disservice. That’s not going to change our life and our practice in any means. But if that’s not a value add that you’re receiving, if you’re out there and you’re developing your, maybe you have a financial plan, but you’re not having it organized through a household, keep that in mind, that’s going to be a big deal. These are again, what I call mistakes that are frequently made as you go through retirement. And if you’re not hitting the ball on these, they will come back and haunt you.
Let’s move to our final topic. It didn’t have a long-winded conversation for our listeners today, but again, I’m hoping this is impactful with some good nuggets. The fourth one that I put down here, not managing risk in a way that’s consistent amongst both spouses. With some spouses, one spouse may be aggressive, one may be conservative. They both need to be heard is probably the biggest thing I want to come back with and say at that point, it’s a job of a good advisor, a good professional to help mediate whether or not they’re on track with keeping things, let’s call it, aggressively, conservatively or a combination of both.
Ricky Lafon: Yeah, absolutely. And I’ll go back to what you just said about viewing things from a household. If we do that, we can accomplish both spouses risk tolerance, so to speak. And really, we’re famous here at Financial Dynamics for saying, “Do we really need to take on more risk than what you need to, to accomplish your goals?”
And a lot of times that satisfies that question right there. But risk is one of those conversations we not only have with our clients when we set up a plan, but this is something we need to talk about each year when we’re reviewing and updating the plan as well.
What we found here with our clients as they get deeper and deeper into retirement, is that typically they become more conservative. They work so hard for their money to have and then throughout retirement, they want to hang onto it, maybe even pass that along. So, we’ll make those small plan adjustments along the way.
Isaac Wright: You know, Ricky, I think overall today, I think we’ve covered the basis directly on some of this, you know, I think, you know, conversations can get very complex, but I think today just being straight forward for all of you today, if you’re listening to us, if you’re married, if you have a spouse and you’re in a situation where you’re trying to marry the two in terms of whether or not you’re ready for retirement and getting your finances in order, we are here to help. We do that day in and day out. If you already have an advisor, that’s great as well, but make sure you’re getting some good advice related to your upcoming goals when it comes to retirement and the finances around that.
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Well, Ricky, I think we’ve been very expedient in today’s program, but I think for the right reasons, and I hope everybody got some good nuggets out of it. Obviously, we’ll be back on the air before you know it and I want to say thanks for always being a part of the team here at Financial Dynamics.
Ricky Lafon: Thanks for having me. Appreciate it.
Isaac Wright: We’ll talk to you soon.