The Money | 05.2014

Two Men In Living Room Talking

MARRIED GAY COUPLES WITH UNEQUAL INCOMES

Pre-planning for contingencies are a crucial factor in successful marriages.

BY GRANT GOCHIN

> Many working couples have unequal incomes, as well as different savings and spending patterns.

What happens when one retires voluntarily or otherwise?

There are uncertainties with Social Security, pensions and unstable markets. Lifetime spending, longevity and healthcare costs are somewhat unpredictable, and even with planning through life, what happens when the unexpected happens?

There can be envy and resentment from the now sole remaining working spouse who views themselves as now carrying the income burden, and their spouse as retired – planned or otherwise.

Some of the other resulting issues include guilt, resentment, power struggles between spouses, overspending, lying about money, denial of needs, and eventually, divorce.

After all, finances are the biggest factor in divorces between long term spouses. Communication and pre-planning for contingencies are a crucial factor in successful marriages.

 


One creative income solution for married couples with unequal incomes is accessing Social Security incomes early under a strategy called “File and Suspend.”


UNEXPECTED OCCURRENCES

Cash flow planning is key, having financial flexibility when it comes to unexpected occurrences removes the necessity for hasty decisions. Couples need to have an understanding and agreement on mutual support with enough reserves set aside to address short term financial needs. A shift from dual incomes to a single income, with a simultaneous need for additional spending can put extraordinary strains on a couple, both financially and emotionally.

Contingency plans need to be established for what spending may be eliminated, and what responsibilities the other spouse is willing to assume. Couples need to be able to shift thinking from “my money” to “our money,” or to have pre-established plans with firm guidelines as to what is to remain separate assets at the time of a crisis. The spending gap from only one income will show what needs to be withdrawn from retirement or other assets and what other plans need to be made.

CASH FLOW STRATEGY

A solution other than debt has to be found, and solutions are possible, we simply need to know where to look. One creative income solution for married couples with unequal incomes is accessing Social Security incomes early under a strategy called “File and Suspend.” Here is a simplistic version of how this strategy works:

Ideally, Social Security should only be accessed at full retirement age when seniors would receive 100 percent of their primary insurance amount (PIA). Filing later means a higher income for life, but what if a married couple has an immediate need for cash? The spouse with the higher PIA files for benefits at their full retirement age (FRA) then immediately files a notice to suspend payments of those benefits. This allows the lower PIA spouse to then apply for a Social Security spousal benefit, which is equal to half of the higher income spouses benefit amount.

This strategy allows for cash flow to enter the household while the other spouse continues to work, and accrue higher benefits, until they are ready to start payments at the latest possible time. The lower earning spouse would then switch to their own full benefit, thus having maximized their future income insofar as possible. To learn more about which social security strategy may be best for you, consult with your financial professional.

Financial planning is not only about current and future planning, it is about contingency planning for unexpected events. Creativity is an imperative.


Grant Gochin is a Wealth Advisor and CERTIFIED FINANCIAL PLANNER(tm) professional at 16200 Ventura Blvd # 415, Encino, CA 91436 Ph: (818) 827-3410. Grant is married (to a man) and he and his husband have one son. Questions and suggestions for future articles should be sent to him at grant.gochin@raymondjames.com.


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