Planning for Marriage: Financial Tips for Women

 Planning for marriage should involve more than just picking out invitations and deciding whether you should serve chicken or fish at the reception. More importantly, you’ll want to take a look at how marriage will impact your financial situation. And while there are a number of issues you’ll need to think about, careful planning can increase the likelihood that you’ll have financial success as you enter this new chapter in your life.

Consider a prenuptial agreement

If either you or your future spouse has or may inherit substantial assets, or if either of you has children from previous marriages, you may want to consider a prenuptial agreement. A prenuptial agreement is a binding contract between future spouses that defines the rights, duties, and obligations of the parties during marriage and in the event of legal separation, annulment, divorce, or death. A prenuptial agreement typically addresses the following areas:

  • Assets and liabilities–What assets will each of you bring into the marriage? What liabilities do each of you have (e.g., credit card/mortgage debt)?
  • Contributions of each partner–Will there be particular consideration given for special contributions that either of you make (e.g., one spouse limiting his or her career)?
  • Divorce–If you and your future spouse divorce, will there be alimony or a lump-sum payment? How will you divide assets purchased from joint funds?
  • Estate planning–Who gets what at the death of either spouse?

Discuss your financial history

Marriage is the union of two separate individuals … and their finances. While talking about money can be a stressful topic for many couples, you’ll want to sit down and discuss your financial history and your future spouse’s financial history before you merge your money.

Start out by taking stock of each of your respective financial situations. You should each make a list of your individual assets (e.g., investments, real estate) and any liabilities (e.g., student loans, credit card debt) you may have. This is also the time to address items such as how much each of you earns and if either of you has additional sources of income (e.g., interest, dividends).

Agree on a system for budgeting/maintaining bank accounts

Right now, you are probably accustomed to managing your finances in a way that is comfortable for you and you alone. Once you are married, you and your spouse will have to agree on a system for budgeting your money and paying your bills together as a couple.

Either of you can agree to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both of you are going to be involved in the budgeting process, make sure that you develop a record-keeping system that both of you understand and agree upon. In addition, you’ll want to keep your records in a joint filing system so that both of you can easily locate important documents.

Once you agree on a budgeting system, you’ll be able to establish a budget. Begin by listing all of your income and expenses over a certain time period (for example, monthly). Sources of income can include things such as salaries and wages, interest, and dividends. Expenses can be divided into two categories: fixed (e.g., housing, utilities, food) and discretionary (e.g., entertainment, vacations). Be sure to include occasional expenses (e.g., car maintenance) as well. To help you and your future spouse stay on track with your budget:

  • Try to make budgeting part of your daily routine
  • Build occasional rewards into your budget (e.g., going to the movies)
  • Examine your budget regularly and adjust/make changes as needed

This might also be a good time to decide whether you and your future spouse will combine your bank accounts or keep them separate. While maintaining a joint account does have its advantages (e.g., easier record keeping and lower maintenance fees), it is sometimes more difficult to keep track of the flow of money when two individuals have access to a single account.

If you do decide to combine your accounts, each spouse should be responsible for updating the checkbook ledger when he/she writes a check or withdraws funds. If you decide to keep separate accounts, consider opening a joint checking account to pay for household expenses.

Map out your financial future together

An important part of financial planning as a couple is to map out your financial future together. Where do you see yourself next year? What about five years from now? Do you want to buy a home together? If you decide to start a family, would one of you stay at home while the other focuses more on his or her career?

Together you should make a list of short-term financial goals (e.g., paying off wedding debt, saving for graduate school) and long-term financial goals (e.g., retirement). Once you have decided on your financial goals, you can prioritize them by determining which ones are most important to each of you. After you’ve identified which goals are a priority, you can set your sights on working to achieve them together.

Resolve any outstanding credit/debt issues

Since having good credit is an important part of any sound financial plan, you’ll want to identify any potential credit/debt problems either you or your future spouse may have and try to resolve them now rather than later. You should each order copies of your credit reports and review them together. You are entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months (go to www.annualcreditreport.com for more information).

For the most part, you are not responsible for your future spouse’s past credit problems, but they can prevent you from getting credit together as a couple after you are married. Even if you’ve always had spotless credit, you may be turned down for credit cards or loans that you apply for together if your future spouse has a bad track record with creditors. As a result, if you find that either one of you does have credit issues, you might want to consider keeping your credit separate until you or your future spouse’s credit record improves.

Consider integrating employee and retirement benefits

If you and your future spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. If your future spouse’s health plan has a higher deductible and/or co-payment or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the premium for one family plan against the cost of two single plans.

In addition, if both you and your future spouse participate in an employer-sponsored retirement plan, you should be aware of each plan’s characteristics. Plans may differ as to matching contributions, investment options, and loan provisions. Review each plan together carefully and determine which plan provides the better benefits. If you can afford to, you should each participate to the maximum in your own plan.

Assess your insurance coverage needs

While you might not have felt the need for life and disability insurance when you were single, once you are married you may find that you and your future spouse are financially dependent on each other. If you don’t have life or disability insurance, you will want to have policies in place in order to make sure that your future spouse’s financial needs will be taken care of if you should die prematurely or become disabled. If you already have life and disability insurance, you should reevaluate the adequacy of your existing coverage and be sure to update any beneficiary designations as well.

You should also take a look at your auto insurance coverage. Check your policy limits and consider pooling your auto insurance policies with one company (your insurance company may give you a discount if you insure more than one car with them). As for renters/homeowners insurance, you’ll want to make sure your personal property and possessions are adequately covered.

Women and Money: Taking Control of Your Finances

Even if you have a partner who traditionally manages household finances, it’s important to be involved in the budgeting and investing decisions that have an effect on your overall financial picture.

Some credit traps to avoid:

  • When using revolving credit, avoid spending more than you can pay off at the end of each billing cycle
  • Be aware of hidden interest and fees
  • When transferring balances to take advantage of low interest rates, be sure to pay off outstanding balances before the teaser rate expires
  • Be sure to make payments on time; otherwise it could negatively affect your credit report

Women and Money: Taking Control of Your Finances

As a woman, you have financial needs that are unique to your situation in life. Perhaps you would like to buy your first home. Maybe you need to start saving for your child’s college education. Or you might be concerned about planning for retirement. Whatever your circumstances may be, it’s important to have a clear understanding of your overall financial position.

That means constructing and implementing a plan. With a financial plan in place, you’ll be better able to focus on your financial goals and understand what it will take to reach them. The three main steps in creating and implementing an effective financial plan involve:

  • Developing a clear picture of your current financial situation
  • Setting and prioritizing financial goals and time frames
  • Implementing appropriate saving and investment strategies

Developing a clear picture of your current financial situation

The first step to creating and implementing a financial plan is to develop a clear picture of your current financial situation. If you don’t already have one, consider establishing a budget or a spending plan. Creating a budget requires you to:

  • Identify your current monthly income and expenses
  • Evaluate your spending habits
  • Monitor your overall spending

To develop a budget, you’ll need to identify your current monthly income and expenses. Start out by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support.

Next, add up all of your expenses. If it makes it easier, you can divide your expenses into two categories: fixed and discretionary. Fixed expenses include things that are necessities, such as housing, food, transportation, and clothing. Discretionary expenses include things like entertainment, vacations, and hobbies. You’ll want to be sure to include out-of-pattern expenses (e.g., holiday gifts, car maintenance) in your budget as well.

To help you stay on track with your budget:

  • Get in the habit of saving–try to make budgeting a part of your daily routine
  • Build occasional rewards into your budget
  • Examine your budget regularly and adjust/make changes as needed

Setting and prioritizing financial goals

The second step to creating and implementing a financial plan is to set and prioritize financial goals. Start out by making a list of things that you would like to achieve. It may help to separate the list into two parts: short-term financial goals and long-term financial goals.

Short-term goals may include making sure that your cash reserve is adequately funded or paying off outstanding credit card debt. As for long-term goals, you can ask yourself: Would you like to purchase a new home? Do you want to retire early? Would you like to start saving for your child’s college education?

Once you have established your financial goals, you’ll want to prioritize them. Setting priorities is important, since it may not be possible for you to pursue all of your goals at once. You will have to decide which of your financial goals are most important to you (e.g., sending your child to college) and which goals you may have to place on the back burner (e.g., the beachfront vacation home you’ve always wanted).

Implementing saving and investment strategies

After you have determined your financial goals, you’ll want to know how much it will take to fund each goal. And if you’ve already started saving towards a goal, you’ll want to know how much further you’ll need to go.

Next, you can focus on implementing appropriate investment strategies. To help determine which investments are suitable for your financial goals, you should ask yourself the following questions:

  • What is my time horizon?
  • What is my emotional and financial tolerance for investment risk?
  • What are my liquidity needs?

Once you’ve answered these questions, you’ll be able to tailor your investments to help you target specific financial goals, such as retirement, education, a large purchase (e.g., home or car), starting a business, or increasing your net worth.

Managing your debt and credit

Whether it is debt from student loans, a mortgage, or credit cards, it is important to avoid the financial pitfalls that can sometimes go hand in hand with borrowing. Any sound financial plan should effectively manage both debt and credit. The following are some tips to help you manage your debt/credit:

  • Make sure that you know exactly how much you owe by keeping track of balances and interest rates
  • Develop a short-term plan to manage your payments and avoid late fees
  • Optimize your repayments by paying off high-interest debt first or take advantage of debt consolidation/refinancing

Understanding what’s on your credit report

An important part of managing debt and credit is to understand the information contained in your credit report. Not only does a credit report contain information about past and present credit transactions, but it is also used by potential lenders to evaluate your creditworthiness.

What information are lenders typically looking for in a credit report? For the most part, a lender will assume that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. As a result, a history of late payments or bad debts will hurt your credit. Based on your track record, if your credit report indicates that you are a poor risk, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate. In addition, too many inquiries on your credit report in a short time period can make lenders suspicious.

Today, good credit is even sometimes viewed by potential employers as a prerequisite for employment–something to think about if you’re in the market for a new job or plan on changing jobs in the near future.

Because a credit report affects so many different aspects of one’s financial situation, it’s important to establish and maintain a good credit history in your own name. You should review your credit report regularly and be sure to correct any errors on it. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. You can go towww.annualcreditreport.com for more information.

Working with a financial professional

Although you can certainly do it alone, you may find it helpful to work with a financial professional to assist you in creating and implementing a financial plan.

A financial professional can help you accomplish the following:

  • Determine the state of your current affairs by reviewing income, assets, and liabilities
  • Develop a plan and help you identify your financial goals
  • Make recommendations about specific products/services
  • Monitor your plan
  • Adjust your plan as needed

Tip: Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make financial recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them.

Merging Your Money When You Marry

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Merging Your Money When You Marry

Getting married is exciting, but it brings many challenges. One such challenge that you and your spouse will have to face is how to merge your finances. Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.

Discuss your financial goals

The first step in mapping out your financial future together is to discuss your financial goals. Start by making a list of your short-term goals (e.g., paying off wedding debt, new car, vacation) and long-term goals (e.g., having children, your children’s college education, retirement). Then, determine which goals are most important to you. Once you’ve identified the goals that are a priority, you can focus your energy on achieving them.

Prepare a budget

Next, you should prepare a budget that lists all of your income and expenses over a certain time period (e.g., monthly, annually). You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both you and your spouse are going to be involved, make sure that you develop a record-keeping system that both of you understand. And remember to keep your records in a joint filing system so that both of you can easily locate important documents.

Begin by listing your sources of income (e.g., salaries and wages, interest, dividends). Then, list your expenses (it may be helpful to review several months of entries in your checkbook and credit card bills). Add them up and compare the two totals. Hopefully, you get a positive number, meaning that you spend less than you earn. If not, review your expenses and see where you can cut down on your spending.

dollar-steps-money-marriage-wedding-bride-groom-billBank accounts–separate or joint?

At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. Maintaining a joint account does have advantages, such as easier record keeping and lower maintenance fees. However, it’s sometimes more difficult to keep track of how much money is in a joint account when two individuals have access to it. Of course, you could avoid this problem by making sure that you tell each other every time you write a check or withdraw funds from the account. Or, you could always decide to maintain separate accounts.

Credit cards

If you’re thinking about adding your name to your spouse’s credit card accounts, think again. When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. In addition, if one of you has poor credit, it will negatively impact the credit rating of the other.

If you or your spouse does not qualify for a card because of poor credit, and you are willing to give your spouse account privileges anyway, you can make your spouse an authorized user of your credit card. An authorized user is not a joint cardholder and is therefore not liable for any amounts charged to the account. Also, the account activity won’t show up on the authorized user’s credit record. But remember, you remain responsible for the account.

Insurance

If you and your spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each planto see if you should continue to keep your health coverage separate. For example, if your spouse’s health plan has a higher deductible and/or co-payments or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the rate for one family plan against the cost of two single plans.

It’s a good idea to examine your auto insurance coverage, too. If you and your spouse own separate cars, you may have different auto insurance carriers. Consider pooling your auto insurance policies with one company; many insurance companies will give you a discount if you insure more than one car with them. If one of you has a poor driving record, however, make sure that changing companies won’t mean paying a higher premium.

Employer-sponsored retirement plans

If both you and your spouse participate in an employer-sponsored retirement plan, you should be aware of each plan‘s characteristics. Review each plan together carefully and determine which plan provides the best benefits. If you can afford it, you should each participate to the maximum in your own plan. If your current cash flow is limited, you can make one plan the focus of your retirement strategy. Here are some helpful tips:

  • If both plans match contributions, determine which plan offers the best match and take full advantage of it
  • Compare the vesting schedules for the employer’s matching contributions
  • Compare the investment options offered by each plan–the more options you have, the more likely you are to find an investment mix that suits your needs
  • Find out whether the plans offer loans–if you plan to use any of your contributions for certain expenses (e.g., your children’s college education, a down payment on a house), you may want to participate in the plan that has a loan provision

 

Not sure where to start with budgeting or planning? Fill out this form or call us today and we can help you reach your goals.

A Retirement Income Roadmap for Women

 

aretirmentincomeroadmanforwomen3More women are working and taking charge of their own retirement planning than ever before. What does retirement mean to you? Do you dream of traveling? Pursuing a hobby? Volunteering your time, or starting a new career or business? Simply enjoying more time with your grandchildren? Whatever your goal, you’ll need a retirement income plan that’s designed to support the retirement lifestyle that you envision, and minimize the risk that you’ll outlive your savings.
When will you retire?

Establishing a target age is important, because when

you retire will significantly affect how much you need

to save. For example, if you retire early at age 55 as

opposed to waiting until age 67, you’ll shorten the

time you have to accumulate funds by 12 years, and

you’ll increase the number of years that you’ll be living

off of your retirement savings. Also consider:

  • The longer you delay retirement, the longer you

can build up tax-deferred funds in your IRAs and

employer-sponsored plans like 401(k)s, or accrue

benefits in a traditional pension plan if you’re lucky

enough to be covered by one.

  • Medicare generally doesn’t start until you’re 65.

Does your employer provide post-retirement

medical benefits? Are you eligible for the coverage

if you retire early? Do you have health insurance

coverage through your spouse’s employer? If not,

you may have to look into COBRA or a private

individual policy–which could be expensive.

  • You can begin receiving your Social Security

retirement benefit as early as age 62. However,

your benefit may be 25% to 30% less than if you

waited until full retirement age. Conversely, if you

delay retirement past full retirement age, you may

be able to increase your Social Security retirement

benefit.

  • If you work part-time during retirement, you’ll be

earning money and relying less on your retirement

savings, leaving more of your savings to potentially

grow for the future (and you may also have access

to affordable health care).

If you’re married, and you and your spouse are

both employed and nearing retirement age, think

about staggering your retirements. If one spouse is

earning significantly more than the other, then it

usually makes sense for that spouse to continue to

work in order to maximize current income and

ease the financial transition into retirement.

How long will retirement last?

We all hope to live to an old age, but a longer life

means that you’ll have even more years of retirement

to fund. The problem is particularly acute for women,

who generally live longer than men. To guard against

the risk of outliving your savings, you’ll need to

estimate your life expectancy. You can use

government statistics, life insurance tables, or life

expectancy calculators to get a reasonable estimate

of how long you’ll live. Experts base these estimates

on your age, gender, race, health, lifestyle,

occupation, and family history. But remember, these

are just estimates. There’s no way to predict how long

you’ll actually live, but with life expectancies on the

rise, it’s probably best to assume you’ll live longer

than you expect.

Project your retirement expenses

Once you know when your retirement will likely start,

how long it may last, and the type of retirement

lifestyle you want, it’s time to estimate the amount of

money you’ll need to make it all happen. One of the

biggest retirement planning mistakes you can make is

to underestimate the amount you’ll need to save by

the time you retire. It’s often repeated that you’ll need

70% to 80% of your pre-retirement income after you

retire. However, the problem with this approach is that

it doesn’t account for your specific situation.

Focus on your actual expenses today and think about

whether they’ll stay the same, increase, decrease, or

even disappear by the time you retire. While some

expenses may disappear, like a mortgage or costs for

commuting to and from work, other expenses, such

as health care and insurance, may increase as you

age. If travel or hobby activities are going to be part of

your retirement, be sure to factor in these costs as

well. And don’t forget to take into account the

potential impact of inflation and taxes.

Identify your sources of income

Once you have an idea of your retirement income

needs, your next step is to assess how prepared you

(or you and your spouse) are to meet those needs. In

other words, what sources of retirement income will

be available to you? Your employer may offer a

traditional pension that will pay you monthly benefits.

In addition, you can likely count on Social Security to

provide a portion of your retirement income. Other

sources of retirement income may include a 401(k) or

other retirement plan, IRAs, annuities, and other

investments. The amount of income you receive from

those sources will depend on the amount you invest,

the rate of investment return, and other factors.

Finally, if you plan to work during retirement, your

earnings will be another source of income.

When you compare your projected expenses to your

anticipated sources of retirement income, you may

find that you won’t have enough income to meet your

needs and goals. Closing this difference, or “gap,” is

an important part of your retirement income plan. In

general, if you face a shortfall, you’ll have five options:

save more now, delay retirement or work during

retirement, try to increase the earnings on your

retirement assets, find new sources of retirement

income, or plan to spend less during retirement.

Transitioning into retirement

Even after that special day comes, you’ll still have

work to do. You’ll need to carefully manage your

assets so that your retirement savings will last as long

as you need them to.

  • Review your portfolio regularly. Traditional wisdom

holds that retirees should value the safety of their

principal above all else. For this reason, some

people shift their investment portfolio to fixed

income investments, such as bonds and money

market accounts, as they enter retirement. The

problem with this approach is that you’ll effectively

lose purchasing power if the return on your

investments doesn’t keep up with inflation. While it

generally makes sense for your portfolio to

become progressively more conservative as you

grow older, it may be wise to consider maintaining

at least a portion in growth investments.
* Spend wisely. You want to be careful not to spend

too much too soon. This can be a great temptation,

particularly early in retirement. A good guideline is

to make sure your annual withdrawal rate isn’t

greater than 4% to 6% of your portfolio. (The

appropriate percentage for you will depend on a

number of factors, including the length of your

payout period and your portfolio’s asset allocation.)

Remember that if you whittle away your principal

too quickly, you may not be able to earn enough

on the remaining principal to carry you through the

later years.

  • Understand your retirement plan distribution

options. Most pension plans pay benefits in the

form of an annuity. If you’re married, you generally

must choose between a higher retirement benefit

that ends when your spouse dies, or a smaller

benefit that continues in whole or in part to the

surviving spouse. A financial professional can help

you with this difficult, but important, decision.

  • Consider which assets to use first. For many

retirees, the answer is simple in theory: withdraw

money from taxable accounts first, then

tax-deferred accounts, and lastly, tax-free

accounts. By using your tax-favored accounts last

and avoiding taxes as long as possible, you’ll keep

more of your retirement dollars working for you.

However, this approach isn’t right for everyone.

And don’t forget to plan for required distributions.

You must generally begin taking minimum

distributions from employer retirement plans and

traditional IRAs when you reach age 70½, whether

you need them or not. Plan to spend these dollars

first in retirement.

  • Consider purchasing an immediate annuity.

Annuities are able to offer something unique–a

guaranteed income stream for the rest of your life

or for the combined lives of you and your spouse

(although that guarantee is subject to the

claims-paying ability and financial strength of the

issuer). The obvious advantage in the context of

retirement income planning is that you can use an

annuity to lock in a predictable annual income

stream, not subject to investment risk, that you

can’t outlive.

Unfortunately, there’s no one-size-fits-all when it

comes to retirement income planning. A financial

professional can review your circumstances, help you

sort through your options, and help develop a plan

that’s right for you.

 

OPERATION: SPRING CLEANING

 

Op-Spring-Cleaning

After a dreadfully long and cold winter, it is now that time of year to pull out the sponges, dusters, vacuums, and buckets!

 

Spring cleaning is an opportunity to throw open the windows, let some fresh air in, and make our homes clean, happy and efficient spaces.  Don’t be daunted by the size of this list, many of the jobs are small ones that will go by quickly, and you’ll be so glad you took the time to do them! Here are some simple tips from a professional blogger, Alicia, hoping to make your spring cleaning more time efficient.

12 Spring Cleaning Tasks That Take 10 Minutes Each

  1. Wash and dry the slipcovers from your pillows, sofas and chairs. Put in the washer and dryer one day. Put back on the furniture the next day.
  2. Take 10 minutes and clean the junk drawer in your house. For many people, this drawer is in the kitchen. Toss the junk and use a silverware organizer to manage the chaos going forward.
  3. Clean the blades on the ceiling fans.
  4. Make today toy clean-up day. Put all the game pieces together in Ziploc bags, throw out broken items and donate toys your kids have outgrown.
  5. Clean out your refrigerator. Check expiration dates and toss everything that is old or will not be eaten.
  6. Clean out your medicine cabinet and toss old medications (both prescription and over-th
  7. e-counter). Go to safeguardmymeds.org to find out how to safely dispose of these items.
  8. Change the batteries in your smoke and CO2 alarms. Why wait for the annoying beeping sound?
  9. Clean your most cluttered countertop. For many it’s the dining room table or kitchen counters. Recycle what you can and shred sensitive materials.
  10. Clean your blinds. Try using fabric softener sheets (you can show your kids how to do this).
  11. Take three days to clean windows. Start with the dirtiest windows and go from there.

    home-cleaning-schedule-list-2
    Click Here to Download this detailed Spring Cleaning Checklist!
  12. Wash and dust the baseboards in each room. This is another task the whole family can get in on. Just remember, 10 minutes with five people is almost an hour of cleaning time.
  13. Dedicate a day to maintaining and fixing things. Oil a lock, fix a broken toilet paper holder, etc. Just make a punch-list and start checking off items.

 

Sometime in the next 30 minutes block off 28 days and determine what time each day you’ll use to tackle spring cleaning. After all, getting started is the hardest part.

 

 

 

 

Read more from Alicia’s Blog HERE 

Planning for Marriage: Financial Tips for Women

 

According to the U.S. Census Bureau, women are waiting longer to get married. Among women, the median age at first marriage in 2010 was 26.1--up from 25.1 in 2000.
According to the U.S. Census Bureau, women are waiting longer to get married. Among women, the median age at first marriage in 2010 was 26.1–up from 25.1 in 2000.

Planning for marriage should involve more than just picking out invitations and deciding whether you should serve chicken or fish at the reception. More importantly, you’ll want to take a look at how marriage will impact your financial situation. And while there are a number of issues you’ll need to think about, careful planning can increase the likelihood that you’ll have financial success as you enter this new chapter in your life.

Consider a prenuptial agreement

If either you or your future spouse has or may inherit substantial assets, or if either of you has children from previous marriages, you may want to consider a prenuptial agreement. A prenuptial agreement is a binding contract between future spouses that defines the rights, duties, and obligations of the parties during marriage and in the event of legal separation, annulment, divorce, or death. A prenuptial agreement typically addresses the following areas:

  • Assets and liabilities–What assets will each of you bring into the marriage? What liabilities do each of you have (e.g., credit card/mortgage debt)?
  • Contributions of each partner–Will there be particular consideration given for special contributions that either of you make (e.g., one spouse limiting his or her career)?
  • Divorce–If you and your future spouse divorce, will there be alimony or a lump-sum payment? How will you divide assets purchased from joint funds?
  • Estate planning–Who gets what at the death of either spouse?

Discuss your financial history

If you and your future spouse obtain joint credit, both of you will become responsible for 100% of the debt.
If you and your future spouse obtain joint credit, both of you will become responsible for 100% of the debt.

Marriage is the union of two separate individuals … and their finances. While talking about money can be a stressful topic for many couples, you’ll want to sit down and discuss your financial history and your future spouse’s financial history before you merge your money.

Start out by taking stock of each of your respective financial situations. You should each make a list of your individual assets (e.g., investments, real estate) and any liabilities (e.g., student loans, credit card debt) you may have. This is also the time to address items such as how much each of you earns and if either of you has additional sources of income (e.g., interest, dividends).

Agree on a system for budgeting/maintaining bank accounts

Right now, you are probably accustomed to managing your finances in a way that is comfortable for you and you alone. Once you are married, you and your spouse will have to agree on a system for budgeting your money and paying your bills together as a couple.

Either of you can agree to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both of you are going to be involved in the budgeting process, make sure that you develop a record-keeping system that both of you understand and agree upon. In addition, you’ll want to keep your records in a joint filing system so that both of you can easily locate important documents.

Once you agree on a budgeting system, you’ll be able to establish a budget. Begin by listing all of your income and expenses over a certain time period (for example, monthly). Sources of income can include things such as salaries and wages, interest, and dividends. Expenses can be divided into two categories: fixed (e.g., housing, utilities, food) and discretionary (e.g., entertainment, vacations). Be sure to include occasional expenses (e.g., car maintenance) as well. To help you and your future spouse stay on track with your budget:

  • Try to make budgeting part of your daily routine
  • Build occasional rewards into your budget (e.g., going to the movies)
  • Examine your budget regularly and adjust/make changes as needed

This might also be a good time to decide whether you and your future spouse will combine your bank accounts or keep them separate. While maintaining a joint account does have its advantages (e.g., easier record keeping and lower maintenance fees), it is sometimes more difficult to keep track of the flow of money when two individuals have access to a single account.

If you do decide to combine your accounts, each spouse should be responsible for updating the checkbook ledger when he/she writes a check or withdraws funds. If you decide to keep separate accounts, consider opening a joint checking account to pay for household expenses.

Map out your financial future together

An important part of financial planning as a couple is to map out your financial future together. Where do you see yourself next year? What about five years from now? Do you want to buy a home together? If you decide to start a family, would one of you stay at home while the other focuses more on his or her career?

Together you should make a list of short-term financial goals (e.g., paying off wedding debt, saving for graduate school) and long-term financial goals (e.g., retirement). Once you have decided on your financial goals, you can prioritize them by determining which ones are most important to each of you. After you’ve identified which goals are a priority, you can set your sights on working to achieve them together.

Resolve any outstanding credit/debt issues

Since having good credit is an important part of any sound financial plan, you’ll want to identify any potential credit/debt problems either you or your future spouse may have and try to resolve them now rather than later. You should each order copies of your credit reports and review them together. You are entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months (go to www.annualcreditreport.com for more information).

For the most part, you are not responsible for your future spouse’s past credit problems, but they can prevent you from getting credit together as a couple after you are married. Even if you’ve always had spotless credit, you may be turned down for credit cards or loans that you apply for together if your future spouse has a bad track record with creditors. As a result, if you find that either one of you does have credit issues, you might want to consider keeping your credit separate until you or your future spouse’s credit record improves.

Consider integrating employee and retirement benefits

If you and your future spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. If your future spouse’s health plan has a higher deductible and/or co-payment or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the premium for one family plan against the cost of two single plans.

In addition, if both you and your future spouse participate in an employer-sponsored retirement plan, you should be aware of each plan’s characteristics. Plans may differ as to matching contributions, investment options, and loan provisions. Review each plan together carefully and determine which plan provides the better benefits. If you can afford to, you should each participate to the maximum in your own plan.

Assess your insurance coverage needs

While you might not have felt the need for life and disability insurance when you were single, once you are married you may find that you and your future spouse are financially dependent on each other. If you don’t have life or disability insurance, you will want to have policies in place in order to make sure that your future spouse’s financial needs will be taken care of if you should die prematurely or become disabled. If you already have life and disability insurance, you should reevaluate the adequacy of your existing coverage and be sure to update any beneficiary designations as well.

You should also take a look at your auto insurance coverage. Check your policy limits and consider pooling your auto insurance policies with one company (your insurance company may give you a discount if you insure more than one car with them). As for renters/homeowners insurance, you’ll want to make sure your personal property and possessions are adequately covered.

 

Counting on Your Husband’s Retirement Income? Three Things Women Should Know

Family with baby picWomen face special challenges when planning for retirement. According to the Department of Labor,1 women are more likely than men to work in part-time jobs that don’t qualify for a retirement plan. And women are more likely to interrupt their careers (or stay out of the workforce altogether) to raise children or take care of other family members. As a result, women generally work fewer years and save less, leaving many to rely on their husbands’ savings and benefits to carry them both through retirement.

But this reliance creates risk–risk of divorce, risk that retirement funds won’t be adequate to last two lifetimes (a risk that falls disproportionately on women, who outlive men on average by five years), 2 and risk of bad retirement payout decisions. Here are three things you should know if you’re relying on your husband’s savings to carry you through retirement.

Qualified joint and survivor annuities

If your husband is covered by a traditional pension plan at work, one of the most important retirement decisions the two of you may make is whether to receive his pension benefit as a “qualified joint and survivor annuity” (QJSA). While the term sounds complicated, the concept is simple: should you elect a benefit that pays a higher amount while you’re both alive and ends when your husband dies (a single life annuity), or a benefit that pays a smaller amount during your joint lives but continues (in whole or in part) to you if your husband dies first (a QJSA)?

In order to fully understand your choices, it may help to first go over how a traditional pension plan works. Typically, you’re entitled to a “normal benefit,” payable for your lifetime and equal to a percent of your final pay, if you work for a certain number of years and retire at a certain date. A plan might say that you’ll get 50% of your final pay for life if you work 30 years and retire at age 65. If you work fewer years, your benefit will be less. If you retire earlier than age 65, your benefit will also be less, because it’s paid for a longer period of time.

For example, assume Joe is covered by a pension plan at work, and his plan contains the exact formula described above. Joe retires at age 65. He’s worked 30 years, and his final pay was $100,000. He’s entitled to a normal benefit of $50,000 per year, payable over his lifetime and ending at his death (a single life annuity).

But in order to protect spouses, federal law generally provides that if Joe is married, the plan can’t pay this benefit to Joe as a single life annuity unless his spouse, Mary, agrees. Instead, the benefit must be paid over Joe and Mary’s joint lives, with at least 50% of that benefit continuing to Mary for her remaining lifetime if she survives Joe. (That’s why it’s called a “joint and survivor annuity;” and it’s “qualified” because it meets the requirements of federal law–“QJSA” for short.)

Now, here’s where it gets a little complicated. Because the QJSA benefit is potentially paid for a longer period of time–over two lifetimes instead of one–Joe’s “normal benefit” will typically be reduced. Actuaries determine the exact amount of the reduction based on your life expectancies, but let’s assume that Joe’s benefit, if paid as a QJSA with 50% continuing to Mary after Joe’s death, is reduced to $45,000. This amount will be paid until Joe dies. And if Mary survives Joe, then $22,500 per year is paid to her until she dies. But if Mary dies first, the pension ends at Joe’s death, and nothing further is paid.

The plan will usually offer the option to have more than 50% continue to you after your spouse dies. For example, you may be able to elect a 75% or 100% QJSA. However, the larger the survivor annuity you select, the smaller the benefit you’ll receive during your joint lives. So, for example, if 100% continues after Joe’s death, then the payment to Joe might now be reduced to $40,000 (but $40,000 will continue to be paid after Joe’s death to Mary if she survives him).

You can rest assured that the QJSA option will be at least as valuable as any other optional form of benefit available to you–this is required by federal law. In some cases, it will be even more valuable than the other options, as employers often “subsidize” the QJSA. “Subsidizing” occurs when the plan doesn’t reduce the benefit payable during your joint lives (or reduces it less than actuarially allowed). For example, a plan might provide that Joe’s $50,000 normal benefit won’t be reduced at all if he and Mary elect the 50% QJSA option, and that she’ll receive the full $25,000 following Joe’s death. It’s important for you to know whether your spouse’s plan subsidizes the QJSA so that you can make an informed decision about which option to select. Other factors to consider are the health of you and your spouse, who’s likely to live longer, and how much other income you expect to have available if you survive your spouse.

You’ll receive an explanation of the QJSA from the plan prior to your spouse’s retirement, which should include a discussion of the relative values of each available payment option. Carefully read all materials the plan sends you. A QJSA may help assure that you don’t outlive your retirement income–don’t waive your rights unless you fully understand the consequences. And don’t be afraid to seek qualified professional advice, as this could be one of the most important retirement decisions you’ll make.

Qualified domestic relations orders

While we all hope our marriages will last forever, statistics tell us that about 50% of marriages in the United States will end in divorce.3 And since more men are covered by retirement plans and have larger retirement plan balances,4 the issue of how these benefits will be handled in the event of a divorce is especially critical for women who may have little or no retirement savings of their own. Under federal law, employer retirement plan benefits generally can’t be assigned to someone else. However, one important exception to this rule is for “qualified domestic relations orders,” commonly known as QDROs. If you and your spouse divorce, you can seek a state court order awarding you all or part of your spouse’s retirement plan benefit. Your spouse’s plan is required to follow the terms of any order that meets the federal QDRO requirements.

For example, you could be awarded all or part of your spouse’s 401(k) plan benefit as of a certain date, or all or part of your spouse’s pension plan benefit. There are several ways to divide benefits, so it’s very important to hire an attorney who has experience negotiating and drafting QDROs–especially for defined benefit plans where the QDRO may need to address such items as survivor benefits, benefits earned after the divorce, plan subsidies, COLAs, and other complex issues. (For example, a QDRO may provide that you will be treated as the surviving spouse for QJSA purposes, even if your spouse subsequently remarries.) The key takeaway here is that these rules exist for your benefit. Be sure your divorce attorney is aware of them.

You can have your own IRA

While it’s obviously important for women to try to contribute towards their own retirement, if you’re a nonworking spouse, your options are limited. But there is one tool you should know about. The “spousal IRA” rules may let you fund an individual retirement account even if you aren’t working and have no earnings. A spousal IRA is your own account, in your own name–one that could become an important source of retirement income with regular contributions over time.

How does it work? Normally, to contribute to an IRA, you must have compensation at least equal to your contribution. But if you’re married, file a joint federal income tax return, and earn less than your spouse (or nothing at all), the amount you can contribute to your own IRA isn’t based on your individual income, it’s based instead on the combined compensation of you and your spouse.

For example, Mary (age 50) and Joe (age 45) are married and file a joint federal income tax return for 2013. Joe earned $100,000 in 2013 and Mary, at home taking care of ill parents, earned nothing for the year. Joe contributes $5,500 to his IRA for 2013. Even though Mary has no compensation, she can contribute up to $6,500 to an IRA for 2013 (that includes a $1,000 “catch-up” contribution), because Joe and Mary’s combined compensation is at least equal to their total contributions ($12,000).

The spousal IRA rules only determine how much you can contribute to your IRA; it doesn’t matter where the money you use to fund your IRA actually comes from–you’re not required to track the source of your contributions. And you don’t need your spouse’s consent to establish or fund your spousal IRA.

(The spousal IRA rules don’t change any of the other rules that generally apply to IRAs. You can contribute to a traditional IRA, a Roth IRA, or both. But you can’t make regular contributions to a traditional IRA after you turn 70½. And your ability to make annual contributions to a Roth IRA may be limited depending on the amount of your combined income.)

Sources

1 U.S. Department of Labor, “Women and Retirement Savings,” (October 2008)

2 The National Vital Statistics Report, Volume 61, Number 6, October 2012

3 The National Center for Health Statistics, “Births, Marriages, Divorces, and Deaths: Provisional Data for 2009 Table A”

4 U.S. Government Accountability Office, “Retirement Security,” (October 2007)

The Traits of a Good Investor and How Women Can Make the Most of Them

One of the best things you can do for yourself and/or your family is to be prepared to manage your finances responsibly. Even if you see investing as overwhelming or complicated and boring, you need to know the basics behind a well-thought-out investment strategy--at least enough to protect yourself from fraud and/or communicate effectively with a financial advisor or spouse.
One of the best things you can do for yourself and/or your family is to be prepared to manage your finances responsibly. Even if you see investing as overwhelming or complicated and boring, you need to know the basics behind a well-thought-out investment strategy–at least enough to protect yourself from fraud and/or communicate effectively with a financial advisor or spouse.

Women are increasingly taking responsibility for managing their own money. That includes those who in the past may have left investing to a spouse because they were busy raising a family or had no interest in the subject, but who have since found that divorce, a spouse’s death, or the need to help a parent have forced them to learn some investment basics. However, many women, including high-level professionals who are experts in their field, may not feel confident about their investing abilities.If you’re one of them, you may have more going for you than you think. Traits such as patience, willingness to confront and deal with mistakes, and recognizing when help is needed can benefit portfolio returns, particularly for a long-term investor. Even risk aversion, sometimes a problem for women who are concerned about their investing abilities, can be an advantage if it’s applied wisely.

Feel you aren’t as knowledgeable as you should be about investing?

Chances are you’re in good company. Plenty of people know less than they should but aren’t willing to recognize or admit it; as a result, their portfolios suffer. Recognizing what you don’t know can be an asset. Being willing to ask questions and understand some basics will serve you better than sticking your head in the sand.

Also, being a good investor doesn’t mean you need to do all the work yourself. A financial professional can help you set a strategy, select specific investments, monitor their performance, and make adjustments as circumstances dictate.

If you make a mistake, can you admit and deal with it?

Many investors’ portfolios have suffered because of a failure to recognize an investing mistake and deal with it; instead, their owners hang on, waiting for a turnaround that may never come. As the saying goes, “Good investors know how to take profits; great investors know how to take losses.” There’s never been an investor who hasn’t experienced losses; smart ones follow a discipline that helps them know not only when to buy but also when to sell an investment or adjust a strategy that hasn’t worked.

Are you risk averse in the right way?

When people feel unsure about their investing skills, they sometimes take the path of least resistance and invest very conservatively. In some cases, this can be helpful. For example, avoiding big risky bets that can single-handedly drag down a portfolio can sometimes lead to better risk-adjusted performance. However, this trait can also be a double-edged sword if you’re investing far more conservatively than is appropriate for your goals and circumstances, either out of fear of making a mistake or from not being aware of how risks can be managed. Being unaware of how inflation can affect investment returns or how to balance various types of risks can leave you vulnerable to a shortfall in your retirement savings or other financial goals.

You don’t have to become a financial wizard to understand principles that can help you manage risk. Having a child involves many risks, but it’s the rare parent who knows everything that will be needed before taking the plunge. You prepare as best you can and improve as you go along; it’s the same with investing.

All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful. But perhaps the biggest risk of all is not taking the steps needed to secure your financial future.

Can you be patient?

Excessive trading costs have historically been one of the reasons individual investors often underperform the stock market as a whole. One study found that because women are less likely to indulge in excessive trading, they outperform men.* A portfolio is–or should be–a means to an end, not a competitive sport. It’s a way to pursue your financial goals, rather than a measure of self-worth or a vehicle for bragging about how you “beat the market.”

Potential investments are all around

Odds are you make many purchasing decisions every day. That means you have a lot of opportunities to observe products and consumer behavior. Everyday life can be a rich source of information that can be applied to investments. For example, if all your friends seem to be flocking to a new retailer or buying a certain type of computer, you might be seeing an emerging trend or company whose value hasn’t yet been recognized by Wall Street. That doesn’t mean you should invest without additional research, of course, but your own daily experience can suggest ideas to explore. Conversely, if you notice that a trendy item that was so hot last year now seems to be showing up more often in clearance bins than shoppers’ carts, you might want to see whether the stock is a candidate for sale.

Step up your game

If you’re afraid to make decisions because you don’t know a mutual fund from a muffin top:

  • Get some basic information. Your retirement plan at work might provide educational materials or assistance, and there are plenty of books, magazines, and websites that can help. Don’t be afraid to talk to friends who may have similar questions, but do your own research, too.
  • Take baby steps and learn as you go. You don’t have to do everything at once; even a small step is better than none.
  • Don’t postpone getting started; the longer you wait, the fewer options you may have. Even if you don’t make your own financial decisions now, the odds are good that you may someday have to do so.
  • Recognize that you’re not alone. Others may have the same doubts as you about their investing abilities.

If you’ve already started working toward your goals but aren’t sure you’re on the right track:

  • Clarify your investing goals, your time horizon, and your level of risk tolerance and make sure you’re properly diversified. If you’re not sure how your money is invested, get whatever help you need to develop an asset allocation strategy that’s appropriate for your goals and risk tolerance.
  • Make sure your expectations for a return on your money are both realistic and sufficient to give you the best chance of achieving your goals. Don’t focus solely on risk, but also on potential reward and ways to try to manage risk. And remember that an investment’s past performance is no guarantee of its future results.
  • Some investments offer potential growth, some focus on protection of your initial investment, and some provide regular income payments. Understand what you own and what role each investment fills in your portfolio. Though diversification can’t guarantee a profit or eliminate potential loss, it can help you manage the types and level of risk you take.
  • An investment club can be a way to explore investing in a social setting. The National Association of Investors Corporation can help you start or find one.

If you’re money savvy:

  • To ensure that you’re making the most of your money, benchmark the performance of your investments and your portfolio as a whole against a relevant index or model portfolio.
  • Make sure your asset allocation adjusts to changes in your life circumstances.
  • Don’t underestimate the impact of taxes, fees, expenses, and trading costs on portfolio performance. If you’ve amassed substantial assets, you might benefit from expert help in dealing with issues such as taxes, estate planning, and asset protection.
  • Have a game plan to keep yourself from panicking during volatile markets.

Equipping yourself to pursue your financial goals is time well invested.

Note:                 Before investing in a mutual fund, carefully consider its investment objective, risks, fees, and expenses, which can be found in the prospectus available from the fund.

*”Behavioral Patterns and Pitfalls of U.S. Investors,” August 2010 Library of Congress report for the SEC.

A Woman’s Guide to Health Care in Retirement

 

At any age, health care is a priority. But when you retire, you should probably focus more on health care than ever before. This is especially true for women. Women live longer, develop certain chronic conditions (e.g., osteoporosis) at a higher rate than men, and are more apt to experience medical limitations that directly affect their daily activities.1 That’s why it’s particularly important for women to factor in the cost of health care, including long-term care, as part of their retirement plan.

How much you’ll spend on health care during retirement generally depends on a number of variables including when you retire, how long you live, your relative health, and the cost of medical care in your area. Another important factor to consider is the availability of Medicare. Generally, you’ll be eligible for Medicare when you reach age 65. But what if you retire at a younger age? You’ll need some way to pay for your health care until Medicare kicks in. Your employer may offer health insurance coverage to its retiring employees, but this is the exception rather than the rule. If your employer doesn’t extend health benefits, you may be able to get insurance coverage through your spouse’s plan. If that’s not an option, you may need to buy a private health insurance policy (which could be costly) or extend your employer-sponsored coverage through COBRA.

Medicare

As mentioned, most Americans automatically become entitled to Medicare when they turn 65. In fact, if you’re already receiving Social Security benefits when you’re 65, you won’t even have to apply–you’ll be automatically enrolled in Medicare. However, you will have to decide whether you need only Part A coverage (which is premium-free for most retirees) or if you want to also purchase Part B coverage.

Part A, commonly referred to as the hospital insurance portion of Medicare, can help pay for your inpatient hospital care, plus home health care and hospice care. Part B helps cover other medical care such as physician services, laboratory tests, and physical therapy. You may also choose to enroll in a managed care plan or private fee-for-service plan under Medicare Part C (Medicare Advantage) if you want to pay fewer out-of-pocket health-care costs. And if you don’t already have adequate prescription drug coverage or belong to a Medicare Advantage Plan, you should consider joining a Medicare prescription drug plan offered in your area by a private company or insurer that has been approved by Medicare.

Unfortunately, Medicare won’t cover all of your health-related expenses. For some types of care, you’ll have to satisfy a deductible and make co-payments. That’s why many retirees purchase a Medigap policy.

Medigap

Unless you can afford to pay out of pocket for the things that Medicare doesn’t cover, including the annual co-payments and deductibles that apply to certain types of services, you may want to buy some type of Medigap policy when you sign up for Medicare Part B. In most states, there are 10 standard Medigap policies available. Each of these policies offers certain basic core benefits, and all but the most basic policy (Plan A) offer various combinations of additional benefits designed to cover what Medicare does not. Although not all Medigap plans are available in every state, you should be able to find a plan that best meets your needs and your budget.

When you first enroll in Medicare Part B at age 65 or older, you have a six-month Medigap open enrollment period. During that time, you have a right to buy the Medigap policy of your choice from a private insurance company, regardless of any health problems you may have. The company cannot refuse you a policy or charge you more than other open enrollment applicants.

Long-term care

Because women tend to live longer than men, they are at a higher risk of needing long-term care. And on average, women need care over a longer time (3.7 years) than men (2.2 years).2 With a longer life expectancy and a greater likelihood of needing long-term care, women often must confront their long-term care needs without the help of their spouse or possibly other family members. Long-term care can be expensive. An important part of planning is deciding how to pay for these services.

Buying long-term care (LTC) insurance is an option. While premiums may be costly, having LTC insurance may allow you to elect where you receive your care, the type of care you receive, and who provides care to you. Many LTC insurance policies pay for the cost of care provided in a nursing home, assisted-living facility, or at home, but the cost of coverage generally depends on your age and the policy benefits and options you purchase. And premiums can increase if the insurer raises its overall rates. Even with LTC insurance, you still may have some expenses not covered by LTC insurance. For example:

  • Not all policies provide coverage for care in your home, even though that’s where most care is actually provided.3 While the cost of in-home care may be less than the cost of care provided in a nursing home, it can still be quite expensive.
  • Most policies allow for the selection of an elimination period of between 10 days and 1 year, during which time you are responsible for payment of care.
  • The LTC insurance benefit is often paid based on a daily or monthly maximum amount, which may not be enough to cover all of the costs of care.
  • While lifetime coverage may be selected, it can increase the premium cost significantly, and some policies may not offer that option. Another option that can be valuable, but also increase the premium expense considerably, is cost-of-living or inflation protection, which annually increases the daily insurance benefit based on a certain percentage.
  • Most common LTC insurance benefit periods last from 1 year to 5 years, after which time the insurance coverage generally ends regardless of whether care is still being provided.

To encourage more individuals to buy long-term care insurance, many states have enacted Partnership programs that authorize private insurers to sell state-approved long-term care Partnership policies. Partnership policy owners, who expend policy benefits on long-term care services, will qualify for Medicaid without having to first spend all or most of their remaining assets (assuming they meet income and other eligibility requirements).

Medicaid and government benefits

Government benefits provided primarily through a state’s Medicaid program may be used to pay for long-term care. To qualify for Medicaid, however, assets and income must fall below certain limits, which vary from state to state. Often, this requires spending down assets, which may mean using savings to pay for care before qualifying for Medicaid.

If you are a veteran, you may be eligible for long-term care services for service-related disabilities and for other health programs such as nursing home care and at-home care through the Department of Veterans Affairs (VA). If you don’t have service-related disabilities, you may also be eligible for VA benefits if you are unable to pay for the cost of necessary care. Visit the Department of Veterans Affairs website (www.va.gov) for more information.

Other health-care factors to consider

It’s clear that health care is an important factor in retirement planning. Here are some tips to consider:

  • Evaluate your present health and project your future medical needs. Considering your family’s health history may help you determine the type of care you might need in later years.
  • Don’t presume Medicare and Medigap insurance will cover all your expenses. For example, Medicare (Parts A and B) does not cover the cost of routine eye exams, most eyeglasses or contact lenses, or routine hearing exams or hearing aids. Include potential out-of-pocket costs in your plan.
  • Even if you have Medicare and Medigap insurance, there are premiums, deductibles, and co-payments to consider.

You may have already begun saving for your retirement, or you could be retired already, but if you fail to include the cost of health care as a retirement expense, you’re likely to find that health-care costs can sap retirement income in a hurry, potentially leaving you financially strapped.

Sources

1 U.S. Department of Health and Human Services Centers for Disease Control and Prevention, “Trends in Health Status and Health Care Use Among Older Women”

2 National Clearinghouse for Long-Term Care Information, “How Much Care Will You Need?”

3 National Clearinghouse for Long-Term Care Information, “Services & Providers”