7 Financial Tips for Not-So-New Newlyweds

Wed, 11 Jul 2018

The song says “Love’s more comfortable the second time around.” But not necessarily when it comes to finances.

Older couples marrying face their own set of questions and challenges about merging their lives—and their money. And by “older,” we’re talking about ages 40+: young at heart, but old enough to have accumulated assets.

You’ve each also accumulated a life’s worth of habits and opinions about spending, budgeting and saving—and they can rub each other the wrong way. Whether you’ve tied your first knot later in life or gotten remarried, here are a few tips to make your financial future harmonious.

  1. Resist the urge to merge. Merging everything may not be the right choice. It may seem simpler to keep track of fewer accounts, but it calls for close communication on where your dollars go. Consider a joint account for your household spending—mortgage, utilities, groceries, insurance and other essentials—but think about maintaining separate accounts for your discretionary spending. That way, when one of you splurges on that $3,000 Gibson Les Paul guitar, the other won’t snap a string. If you create a joint account, make sure it is set up correctly with beneficiary designations to ensure right of survivorship; if the unthinkable happens to one of you, the other will be able to access it unencumbered.

  2. Create a common budget. Even though you’ve both been managing your own money successfully, there are crucial reasons to sit down and budget again. Start by mapping out your fixed monthly costs like mortgage/rent, utilities and car payments. You may find these expenses are a little different now that you’re married. Next, think about the variable costs you’ll need to factor in to support the lifestyle you want together. Things like that new pool in the backyard, more nights out or those annual family vacations. This will allow you to identify any gaps in your budget or savings habits to support your new life together. Create a five-year plan you can follow to see if you’re staying on track. Your regular living expenses may change through the years—another reason why budgeting should never be a one-time event, but a work-in-progress.

  3. Build a retirement income plan. Perhaps your biggest goal is a secure retirement, and it’s never too soon to start planning. At what age will each of you start collecting Social Security? Will you both stop working at the same time? What retirement dollars will you each bring to create an income stream? If one or both of you are coming from a divorce, you’ll have special considerations, including the impact on your Social Security benefits. Likewise, many pension plans require you to make survivorship choices—decisions that require thorough planning.

  4. Factor in the high costs of healthcare. The so-called golden years deplete your gold fast if you don’t effectively plan for healthcare during retirement. Did you know that the average healthy 65-year old couple retiring today can expect to pay over $400,000 in healthcare expenses alone during retirement? Special savings vehicles like Health Savings Accounts (HSA) offer a tax-efficient way to save and pay for healthcare in retirement. And, given your “married” status, you can save even more in these accounts until you turn 65 (Remember that once you enroll in any part of Medicare, you won’t be able to contribute to your HSA). Also consider the high cost of long-term care, should you need it. In 2017, the cost of nursing home care exceeded $97,000/year. Long-term care insurance can help protect you and your loved ones from the crippling cost of care.

  5. Look hard at the way you both use credit. Did one of you come into the marriage with significant credit card debt? Does one partner have a fist full of credit cards, while the other gets by with just one? Here are a couple of ways to sort things out: Start with the rule of thumb of keeping your balances below 30 percent of the card’s maximum limit. Keep the card with the longest credit history, since it shows how well the owner has used credit over time. Then see which cards have the lowest APR or the most bonus points or cash back. Those are keepers. You may then want to pay off the others, and you may be tempted to close the accounts. Just bear in mind that closing credit card accounts can ding your credit score. (Your score is determined in part by a metric called your debt-to-limit ratio. It compares your present balances to the total credit limit of all your cards. Closing some of your cards may make your debt seem high, compared to your limit—and that can lower your score.)

  6. Beware of the marriage penalty No, we’re not making a mother-in-law joke. If both of you have high incomes, you may end up paying more in income taxes jointly than you would if you each filed separately. Take stock of your combined incomes and check current income tax rates for married couples filing jointly.

  7. Consider a third-party advisor. Of course, financial discussions like these aren’t always comfortable. And while love may be blind, there can be blind spots in financial planning for newlyweds who are merging lives—and assets. Often, couples just aren’t aware of some of the questions they need to ask. It can help to have an objective, knowledgeable third party guide the discussion—someone who has seen a wide range of situations and helped solve the different problems that can arise. Ultimately, your plan will involve your accountant, attorney and banker. Together, you’ll create a tailored plan for your own unique long and happy life together. Connect with Webster to find a financial partner who can give you an unbiased perspective on your financial next steps (as well as a hearty congratulations on your newly wedded bliss).

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Sources: Health View Services, Retirement Health Care Costs Data Report, 2017; Genworth Financial, Cost of Care Survey, 2017.