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Episode #523 - Retirement Plan Live Mature Marriage - Shared Resources

Roger: The show is a proud member of the Retirement Podcast Network. 

As you listen to this, I am likely swimming in the ocean or hiking in the jungles of Costa Rica on a grand adventure for my birthday.

Hey there. 

Welcome to the Retirement Answer Man show. Roger Whitney here, and this is the show dedicated to helping you not just survive retirement but have the confidence because you're doing the work and being intentional to lean in and rock retirement. It's all about that intentionality. I am 57. By the time you hear this, I'm actually recording it before I head off to Costa Rica and I decided to do this grand adventure with Dr. Bobby Dubois, and actually the author of The Comfort Crisis is the host, Michael Easter, of a small group to do a Masogi, something he talks about in that book, which is really something really, really hard mentally and physically. You're not sure if you can complete it, you know, you're not going to die to test yourself and to keep stretching yourself.

I'm excited for this adventure that I'm on currently. Hopefully, I'm sure I'm suffering right now, but we'll enjoy it afterwards. Right, this second, I am probably wondering what the heck was I thinking doing this, but that's sort of part of the fun. Try to keep growing. I'll let you know how it goes when I get back.

Today on the show, what we're going to do is talk with Mark and Mary and organize their resources, their social capital, their social security, and any pensions they might have. Their human capital, if they plan on working part time after retirement. Then their financial capital, what Mary is bringing to the marriage, what Mark is bringing to the marriage, and how they're going to navigate their separate but together when it comes to financial resources relative to their goals.

So, we're going to do that. That should be a good discussion. Then we'll have a smart sprint for you to organize your resources as well. Oh, I forgot to tell you before we get to Mark and Mary, make sure you register at livewithroger.com for our results show where Mark and Mary are going to be there live.

We're going to talk through with them their framework for their retirement plan. You'll be able to ask questions and we'll have a discussion to try to help them build a framework to launch this new life, but also to help you answer your important retirement questions. 

In addition, what we'll do is that day, February 1st, when we have that live meetup, we're going to invite you to join the Rock Retirement Club, where we have all the resources gathered for you to build your retirement plan of record and begin your intentional journey of rocking retirement. So, you can do that at livewithroger.com.

RETIREMENT PLAN LIVE

Now it's time for the next installment of Retirement Plan Live with Mark and Mary. Married later in life, age 57, and have been married about 13 months. Last week we had them identify their values and then create goals that represented them living out their values. Because it's a marriage later in life, only 13 months old, he has some goals that are his, she has some that are hers, and then they came up with some for both of them together.

Now we need to turn to their financial resources that they have to marshal to pay for these goals. Just like their goals, he's going to have some resources he's bringing, she's going to have some that she's bringing and potentially they'll have some that they have as joint that they're bringing together. In this case, they don't because their marriage is so early.

What resources do they have or do you have to pay for retirement? Well, there's three main categories. There's social capital, which is like Social Security and pensions, etc. Human capital, work, rental income, consulting, etc. Then what we normally think of as capital is our financial capital, our money, our 401ks, etc.

So, let's look at what Mark and Mary are bringing. 

We'll start with Social Security under Social Capital. Both of them had professional jobs or still do. I'm going to assume they make the same amount of money, so their social security benefit at their full retirement age, which is 67, is just over 46, 000 per person, and then that will be adjusted for inflation going forward.

Now, in this feasibility pillar, this stage of the process, I suggest that we just use the full retirement age benefit, even though they could start early or one of them or both of them can start later. Rather than get into that optimization discussion now, let's just stick with the full retirement age as the claiming strategy for both Mark and Mary.

They both have a benefit of about 46, 000 a year. Do they have any other social capital? So, let's look here. Mary is bringing a pension to the marriage. She has a pension that's going to start in 2027, and her estimated benefit is 30, 000 a year for all of her life. Now, she's never looked at this other than a life only option because she's never been married before, but she also has the option when she goes to claim this pension to do joint life, so it would last for her and Mark's life, or a period certain, so if she were to pass, it would go on for a certain period of time. 

Any of those other options would lower it from 30, 000 based on the actual earlier assumptions. So, she's going to have to decide what does she do with her resource now that she's married when she gets to that pension decision. Mark doesn't have any other social capital, so now let's move on to human capital.

Mary doesn't have any human capital. When she retires, she doesn't want to do part time work. She doesn't have any rental income, etc. She's just going to be retired from earning income. Mark, on the other hand, He has some rental property income, so he has a house from his last marriage that he kept, and he rents out, and his rental property income, net of all expenses and taxes, is 12, 000 a year, and he doesn't have any plans to sell this rental home he owns, so he's going to have income coming in as his income to their marriage of 12, 000 a year. We'll assume that that will go to the end of his life and that inflation is adjusted. Since leases are renewed, you can increase rents. So now Mark has income of 12, 000 rental property. Mary has income of 30, 000 from her pension, not inflation adjusted, and then they both have their social security. 

All of these resources, his and hers are available to pay for his, her, her, and their goals. Now, the amounts that those income sources don't cover are going to have to come from their financial assets. This is usually what we think about when we think about retirement planning, which is the money that they both saved up. So, let's review what they have. We'll start with Mary. 

Mary has a 401k where it's worth a million dollars. She has a 401k from her savings. She's maxing it out, so 30, 500, she's contributing it per year, but she's going to stop when she retires. Mary also has an after-tax savings account of 50, 000, which she's been contributing 6, 000 a year to, but that contribution, again, would end when she stops working, and ideally that would be next year.

Now, what does Mark have? Mark has a 401k of 800, 000, which he's contributing 31, 000 a year to with some match. He'll continue contributing while he's working, and I think he's going to work another five years, he said. He also has a Roth IRA of 60, 000 and a savings account of 100, 000. He says he contributes about 12, 000 a month to that until he stops retiring.

So about just over 2 million they both have. In combined resources, and they're relatively equal from a value standpoint, but if Mary retires in 2025, which we've yet to see whether that's feasible, her savings will stop and Mark, in theory, would continue to contribute to his assets, and so they're going to have to decide how do we bring these together for our goals, but still take care of our separate goals.

Then our last installment of this series before the live results event, we're going to talk about different ways of using resources to pay for his, her, and their goals. 

Now you can imagine a scenario Where the asset values of what people bring to a later in life marriage are very different. I have clients where one spouse has a net worth or financial resources that are more than three times the other spouse, so when you get into the discussions of who uses what resources for what goals, you can see how that can get a little bit complicated where you'd have to have some discussions about that.

That's their financial resources. Now their other resources are, and this is where it can get a little bit interesting, Mark has his rental property that he owns outright, that's worth 200, 000. So that's an asset that could be sold at some point in the future. And if you recall, they actually own a home jointly that they purchased just prior to their marriage. So, they went in and bought a house together. The assumption we're going to make is that this home is worth $1.4 million. That's what they paid for it, and they have a loan of a half a million dollars that has a mortgage on it where the annual payments are $30,000 a year for principal and interest. 

In fact, we're going to add those annual payments to their goals. I think I did that last week. So, we're also going to have as a joint goal, 30, 000 a year for 27 years with no inflation adjustment represented in this mortgage for the house that they own together. 

Now, here's the interesting thing about this house with Mark and Mary is that when they purchased the house, Mary put down 70 percent of the down payment. So, the down payment was 900, 000, so they put a lot of money down on this house and she contributed 70 percent of the down payment or 630, 000 to the home equity or the equity in the house. So, there's not an equal distribution of who contributed money to this house. Why might that be? Well, perhaps Mary just had a lot more money in after tax assets than Mark did. So, I think right now she has 50, 000 in savings and he has 100, 000 in savings. So, prior to the purchase of this home, she had that 50, 000 plus the 630, 000 down to contribute to this house and they didn't want to have a huge payment so she contributed the 630, 000 or maybe he was renting. She had a home. She sold her home and used her proceeds plus some of her savings. to the house. 

Now, without thinking, although Mary contributed 70 percent of the down payment, and now they're making payments equally, the deed on the house is in joint name. I think that's how it is with my wife. We have a mortgage on our house. I think the mortgage is in my name only, just because it was easier for me to sign everything and not have to manage getting signatures twice. But the ownership of the house is in both of our names. So, they may have done this without really thinking about it. But now let's think of what that might do. What happens if one of them passes? What happens if Mary passes first? Well, the house goes to Mark in this case. All of her down payment on this house would become Mark's assets, and perhaps she wanted some of that to go to her son. We're going to think through some of these things and try to frame some considerations you want to have if you're looking at a later in marriage life to try to avoid some unintended downstream consequences.

That's where we're at. They have a 1. 4 million house where Mary put down 70 percent of the down payment, and then they have a mortgage of 500, 000 that they're both contributing to, and we put that back in the goal of about 30, 000 a year or 2, 500 a month. 

So, their joint net worth is, let me pull it up here. 3, 110, 000 net worth is all of your assets. Minus your liabilities that gets us to the 3. 1 million in net worth. But we also have these other assets. Mary's pension of social or pension of 30, 000 a year in the form of social capital and Mark's income from that rental property of 12, 000 a year, which are assets in a way is definitely the pension, that don't get represented on a traditional net worth statement. 

If we break down their net worth of 3. 1 million, Mark has assets of 1. 16 million, Mary has assets of 1, 050, 000, they jointly have assets of 1. 4 million, the house, although Mary contributed the majority of the down payment, and they jointly have a liability of 500, 000 on the house. So, these are the assets that they have relatively equal makes it a little bit easier, but they have different income sources and they have some individual goals. Like I said before, you can imagine if these were very lopsided and we're going to go through some examples of how to navigate that in our next session.

Anyway, that is the resources that Mary and Mark have to pay for his, her, and their goals now in our live event on February 1st, we're going to work through this and see is this feasible for Mary to retire this year and do all of this. If it's not what is a feasible plan and how might they think about how much do each of them contributes to each other's goals, and how do they maintain their agency for things they brought into the marriage or control of things they brought into the marriage and people, the two adult children that they have some obligation or desire to give to later in life? We're going to do all that on February 7th, and you can sign up for that live event at livewithroger.com. Even if you can't attend, you can sign up and we'll send you the replay. 

Now, next week, what we want to do is we want to talk through one, some of the considerations when bringing mine, your assets to our marriage, when you are later in life, because there are some considerations in understanding downstream consequences of how things are titled and the interested parties involved, which essentially in this case are the two adult children from separate marriages.

Then also, how do you communicate? How do you have some healthy communication about this? So, you can potentially avoid some uncomfortable conversations because there was no clarity on how things were going to be done. And obviously Mark and Mary, as we talked about last week, had to step away because they didn't have nearly as much clarity and go through that exercise as perhaps, they should have.

So that's what we're going to do next week.

BRING IT ON WITH MARK ROSS

Welcome to the Rock Life segment, where we're going to noodle on how to develop a great mindset in retirement. To help us is Mark Ross, coach in the rock retirement club. How are you doing, Mark? 

Mark: Doing good out here today. Sun's out loving it. 

Roger: Now I have a lot of conversations with people transitioning and living in retirement, usually in their fifties and sixties. When they think about retirement. They're excited about the first 10 years. We start talking about 80 to 90, the later years, all of a sudden, their attitude about that gets a little less positive. So, from a mindset standpoint, how do we think more positively about later years in retirement?

Mark: Yeah, great question. I'm not 80, I'm 67, but I've been thinking about this for the last couple of years, this whole thing of aging. I think it's because we've watched parents pass away. I've had some friends that have gotten sick and passed away, and it's kind of dancing all around me. And I started thinking, wow, I'm not 57, I'm 67.

By the way, I think you and I met like 10 years ago. So, we're both 10 years older, and I have to say, this has been a little bit of a struggle for me, like to accept that I am aging, but I don't feel old, old, but I found a resource that's really helped me with my mindset and perspective. 

Roger: Before we go to the resource, to put a really sharp point on it, as we get older, at least in my experience, we're surrounded by a lot more illness and bluntly a lot more death.

Mark: Yep. 

Roger: We start to know a lot more people that are dying, and even if they're dying with just a great life lived, it’s hard to have a positive attitude when you start to just have to deal with these transitions more and more, these events more and more. I don't ever remember dealing with this in my 40s or my 30s.

Mark: You know, it happened, but it was different. It wasn't as frequent. We were at dinner with some friends not long ago, and sometimes you hear us talk about, oh, I got to have a knee replaced, or I got to do this or that. It's like, I must have made a comment that triggered one of them, and they turned to me and said, let's just face it we're old now.

I thought. I don't think I will buy that. What is old? How old is old?

That's why mindset is so important and who we listen to and who our friends are and who we surround ourselves with. So, I started digging into this and found a resource. It's a great book, great title. It's called, Who Do You Want to Be When You Grow Old?

These two guys wrote it and one of them has been really involved in the purpose movement. I've actually read it twice. I'm rereading it.

Roger: The purpose movement?

Mark: The purpose movement is this guy's like 75 Richard Leider, 75, 76, 77. There is a path to purposeful aging. He admits I'm not young, I'm older, but I choose a purposeful path for aging.

Roger: Okay. Okay. I thought it was some foo foo thing. I just wanted to check. 

Mark: No, no, no. I thought that at first too. It's not how to live to 125 and never have any ailments. It's nothing like that. 

It's accepting the fact that as, and here's the premise, as we grow older, emphasis is on grow. We don't just have to get older. So, in our minds, what if we tell ourselves, who do I want to be as I grow older.

He distills this for himself after doing tons of research and working with a lot of smart people, it's like his mantra for himself when he gets up in the morning is grow and give. That's me. I grow and I give. I learn. I do things that are meaningful to me.

He's hiked mountains and taken people out into deserts and things. He can't do all that stuff like he used to, but it's not like, what can I not do anymore? It's like, what can I still do that makes sense to me and brings purpose and meaning to my life?

It's pretty common-sense stuff, but it takes some intentionality to think in these terms and not get stuck and swim around into, I'm old. I go to the doctor more frequently. I just went this morning for the checkup of dermatology. He said, don't come back for a year. I thought, well, that's interesting. It used to be every six months. So, I like that.

Roger: Well, this idea of positive mindset. Sometimes it can feel like it's being Pollyannish, and just ignore all those aches and pains that you have. I mean, I don't know about you, Mark, but I wake up every day with aches and pains. Or when I start to exercise, I don't feel as young as I used to. 

Mark: Right. 

Roger: But I do it anyway.

Mark: Mm hmm. 

Roger: I think it's important that you don't have a choice. You're going to grow old either way. It's just a matter of, do you approach it as much on your toes and leaning into it in some purposeful way or on your heels and just letting it happen to you? It sounds easy, but it's not. 

Mark: Well, that's true, and it does take a lot of intentionality to think in those terms.

He gives three things that, well, he gives a lot, but here are three things that if we pay attention to these, I believe we can all find ourselves in a valley at times. I don't care how positive you've been, and this isn't positive psychology. It's just, it's common-sense kind of stuff. 

But he says, usually when we're doing something that helps other people, it brings purpose to them and meaning to ourselves. And a lot of us struggle with finding purpose sometimes. Maybe it fades away, but here's something he says, let's refresh. Let's find out how we want to help other people. What is the way you or I might want to help other people?

Second thing is to find out who you really want to help. Who are these folks that you think you want to help?

Then find out and ask yourself, this is always good exercise, what energizes you and gives you a smile on your face? Then what drains you? 

Those three simple steps can help refresh this mindset of, and hey, I'm 67, okay? I know that. I know people in their 80s that have a lot of ailments and they don't tend to complain about them a whole lot, and they don't ignore them either, but they don't dwell on it. They have something going on in their life that's bigger than themselves, and that tends to help them, I think, be on this path of purposeful aging.

That's what excites me about it and keeps me encouraged, because I do know some folks that if I stay around them too much, I feel like 10 years older when I leave their presence and I got to have some boundaries there. I say, I don't want to be one of those people. 

I want people to walk away from me smiling, not saying that guy's always complaining. He must be old. 

Roger: That's why I always limit the ailment talk whenever I have dinner with friends to like five minutes, and then I redirect. 

Mark: Yeah, don't ignore it, admit it, and move on, right? 

Roger: Alright, great advice. Thanks, Mark. 

TODAY’S SMART SPRINT SEGMENT

On your marks, get set,

and we're off to take a little baby step that we can take over the next seven days to not just rock retirement, but rock life. 

Alright, as part of that 2024 kickoff theme, In our Smart Sprint, I want you to organize and refresh your financial resources. Maybe it's updating your Social Security estimate, because those change every year, and updating your net worth statement.

By this time of the month, you should have gotten all your end of year statements, or you can go online and refresh where you sit from a financial perspective on all of your assets and all of your liabilities, because that can help set the table for you to make better financial decisions.

CONCLUSION 

Next month on the show, we're going to explore the FIRE movement, financial independence, and retire early. 

This is a movement that is taken on some momentum with 20-, 30- and 40-year-olds. I love it because there's so much intentionality about being financially independent. The retire early part, we can talk about another day, but next month on the show, we're going to have Kevin Sebesta, coach in the rock retirement club who retired, I think at 40 or 41, talk about what this fire movement, what it's all about, but also we're going to try to extract for you and I, things that we can learn from it to incorporate in our planning for rocking retirement. So, you can check that out in February. 

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal tax or financial advisor before making any decisions.