Retirement muddles couple's financial plans
A Marion County resident agreed to have her finances reviewed, under an assumed name, by a Tabor College accounting professor.
Jane Doe understands the importance of financial planning, but understanding how much money she needs is difficult for someone approaching retirement-age.
“We didn’t plan very well ahead,” she said. “I needed money I could spend now without having a full-time job.”
Her husband is retired, but being in her mid-50s, Doe is unsure how much she needs to make to ensure their well-being. Her husband has access to Medicare, but Doe is paying her own insurance since she retired early.
“Do I have to go out and get a full-time job to cover the insurance I’m paying on my own,” she said. “Can I take some out of here? I counseled all my kids on good credit, but I didn’t even think about me.”
Doe and her husband each have savings accounts, he has Ameriprise account, and she has a retirement fund through Teachers Insurance and Annuity Association of America.
Since there are several accounts to consider it’s important to create multiple budgets, said Tabor accounting professor Lily Arthur.
“That’s going to tell you the number you need to reimburse,” she said. “Does that mean you have to find a job, and how many hours do you need to work, what job are you looking for, and how much do you need to get paid?”
Another option is adjusting which expenses are paid from Doe’s account and which are paid through her husband’s.
Doe’s family has $29,000 in her husband’s checking account and $4,000 in her own.
Doe can keep her accounts as they are, but to grow that money she will have to restructure and invest more, Arthur said.
“Ideally, if you can put that money somewhere to actually make money on it, so it’s growing instead of decreasing, that would be even better,” she said.
Diversifying her funds does not mean Doe has to take big chances, Arthur said.
Since Doe’s husband has an Ameriprise account, investing in money market accounts through the company would help increase funds, Arthur said.
“It’s almost like a savings account, but with better interest, and you also have the ability to write checks,” she said. “You have the money in the account, but it’s growing off the mutual fund interest instead of savings account interest.”
There is inherent risk, but using resources like Ameriprise or Vanguard carries more safety than investing independently, Arthur said.
Operating within a budget often means setting aside an emergency fund, she said.
“I think a lot of people don’t even have one,” Arthur said. “I don’t think that’s a thought process. You have a credit card so, ‘I’ll just put it on the credit card.’ Which is fine, but if you don’t have that money to pay it off then you have to be careful.”
Keeping money set aside decreases the worry when funds are needed for emergencies, Doe said.
“You’re probably in a stressful situation if that happens,” she said. “If you have three months’ backup at least you don’t have to be so stressed.”
Even once that money is set aside, it needs to be replenished as emergency expenses arise, Arthur said.
Financial experts like Dave Ramsey can be helpful, but it’s important to look at different opinions to consider many options, Arthur said.
“It’s OK to disagree with different parts of it,” she said. “You have to get different people’s perspectives to be able to figure out what works for you. I know what works for me, but it doesn’t work for my mom.”
Last modified March 5, 2020