5 Steps to Claim Your Ex’s Social Security After Divorce

Love and marriage don’t always last forever. But if your matrimony lasted 10 years or more, the financial benefits can last a lifetime. That’s because you may be able to take Social Security based on your ex-spouse’s benefits instead of your own, even if you divorced decades ago.

The philosophy is that both spouses often contribute economically during the marriage, even if only one person was employed. The Social Security rules protect those who spent most of their working years raising a family or playing a supportive role to their spouse and may have no retirement savings of their own.

The Rules for Social Security After Divorce

The maximum benefit you can get based on the record of a spouse — whether you’re currently married or divorced — is 50% of their full retirement age benefit. Full retirement age is the age at which you qualify for 100% of your benefit. It’s 66 or 67, depending on when you were born.

If your ex-spouse dies before you, you’ll typically be eligible to receive survivors benefits of 100% of the monthly payment they were receiving, just as you could if your current spouse died.

People with a long employment record will typically qualify for a bigger benefit based on their own earnings instead of a spouse’s. Social Security will give you the bigger benefit, but not both.

If you do qualify for more money thanks to your ex-spouse, they’ll technically give you whatever benefit you earned based on your record. Then, they’ll use your ex’s record to make up the difference.

Seeking to get revenge on an ex-spouse by claiming their Social Security? Move on. Your decision won’t affect their benefits in any way, nor will it impact their current spouse if they’ve remarried. If they’ve been married multiple times, all their exes are allowed to claim on their record.

Occasionally, a divorce settlement will state that one spouse can’t collect Social Security based on the other person’s record. Such stipulations are utter nonsense. The Social Security Administration says they’re “worthless and never enforced.”

How to Get Your Ex’s Social Security in 5 Easy Steps

Since your Social Security checks won’t affect your ex in any way, the only reason to try to claim their benefits is if you think you can get more money. If you suspect their record will maximize your Social Security, follow these five steps.

1. Make Sure You Can Answer ‘Yes’ to These Questions

To qualify for an ex’s Social Security benefits, you need to be able to answer “yes” to these four questions.

  • Were you married for 10 years or more? If your marriage lasted less than 10 years, you won’t qualify for an ex’s benefits. Common-law marriages don’t count. You also need to have been divorced at least two years before you can start getting checks based on your former spouse’s history, unless they’ve already started receiving benefits.
  • Are you at least 62? This is the minimum age for starting Social Security retirement benefits, no matter whose record you’re using. However, you can qualify regardless of your age if you’re caring for your ex’s child who is under 16 or disabled. If your ex-spouse is deceased, you can qualify for survivors benefits at age 60, or age 50 if you’re disabled.
  • Are you still unmarried? If you’re currently married, you can only claim on your record or your current spouse’s record. You’ll only be eligible 50% of their full benefit as well. And if you’ve been married and divorced multiple times? Social Security will use whichever ex-spouse’s record gives you the biggest benefit. Remember, though: Only marriages that lasted 10 years or more will count.
  • Is your ex eligible for benefits? In addition to the minimum age of 62, Social Security requires at least 40 work credits, which amounts to 10 years of full-time work, to start benefits. If your ex doesn’t meet these criteria, there’s no benefit for you to claim. Note that they don’t need to be receiving benefits. They just need to be eligible.

2. Gather Your Ex’s Information

You’re going to need some information to prove to Social Security that you’re eligible for your ex’s benefits. Be prepared to provide your marriage license and your divorce decree.

Social Security will also need to locate their record. This will be easiest if you still have their Social Security number. If you no longer have it, Social Security may be able to find their record if you can provide their date of birth, where they were born and the names of their parents.

3. Resist the Urge to Tell Them

Remember: Your decision to seek more Social Security on your ex’s record does not affect them in any way. So there’s absolutely no reason to contact them about it. You don’t need their consent to get benefits based on their record. Social Security will not contact them about your application.

4. Ask Social Security Whose Record Gets You the Best Benefit

Now take that information you gathered about your ex to Social Security so you can figure out whose record will give you the biggest benefit. You can call them at 800-772-1213 or visit your local office. An appointment isn’t required, but scheduling one can cut down on your waiting time.

5. Delay as Long as Possible (but Not Too Long)

The earlier you take benefits, the lower your monthly checks will be, no matter whose record you claim on. The 50% you can qualify for from their history is the maximum you’ll get if you wait until your full retirement age of 66 or 67. For every year you claim before then, you’ll permanently reduce your benefits by 6.66%. If you claim at 62, you’d only qualify for 32.5% of their benefit.

Don’t wait too long, though. When you take benefits on your own record, you get an extra 8% for every year you delay past your full retirement age until your benefits max out at 70. But when you’re getting spousal benefits, you don’t earn delayed retirement credits. You won’t get extra money for waiting past your full retirement age, so there’s no point in delaying any further.

A final note: In the past, a common Social Security strategy was to claim based on a current or former spouse’s record as early as possible, then switch over to your own bigger benefit later on. But the rules changed under a 2015 law called the Bipartisan Budget Act. Now this is only an option if you were born Jan. 2, 1954, or earlier.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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Source: thepennyhoarder.com

10 Questions Retirees Often Get Wrong About Taxes in Retirement

You worked hard for your retirement nest egg, so the idea of paying taxes on those savings isn’t exactly appealing. If you know what you’re doing, you can avoid overpaying Uncle Sam as you start collecting Social Security and making withdrawals (including RMDs) from IRAs and 401(k)s. Unfortunately, though, retirees don’t always know all the tax code ins and outs and, as a result, end up paying more in taxes than is necessary. For example, here are 10 questions retirees often get wrong about taxes in retirement. Take a look and see how much you really understand about your own tax situation.

(And check out our State-by-State Guide to Taxes on Retirees to learn more about how you will be taxed by your state during retirement.)

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Tax Rates in Retirement

picture of tax rate arrow chart showing upward trendpicture of tax rate arrow chart showing upward trend

Question: When you retire, is your tax rate going to be higher or lower than it was when you were working?

Answer: It depends. Many people make their retirement plans with the assumption that they’ll fall into a lower tax bracket once they retire. But that’s often not the case, for the following three reasons.

1. Retirees typically no longer have all the tax deductions they once did. Their homes are paid off or close to it, so there’s no mortgage interest deduction. There are also no kids to claim as dependents, or annual tax-deferred 401(k) contributions to reduce income. So, almost all your income will be taxable during retirement.

2. Retirees want to have fun—which costs money. If you’re like many newly retired folks, you might want to travel and engage in the hobbies you didn’t have time for before, and that doesn’t come cheap. So, the income you set aside for yourself in retirement may not be much lower than what you were making in your job.

3. Future tax rates may be higher than they are today. Let’s face it…tax rates now are low when viewed in a historical context. The top tax rate of 37% in 2021 is a bargain compared with the 94% of the 1940s and even the 70% range as recently as the 1970s. And considering today’s political climate and growing national debt, future tax rates could end up much higher than they are today.

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Taxation of Social Security Benefits

picture of a Social Security card surrounded by stacks of coinspicture of a Social Security card surrounded by stacks of coins

Question: Are Social Security benefits taxable?

Answer: Yes. Depending on your “provisional income,” up to 85% of your Social Security benefits are subject to federal income taxes. To determine your provisional income, take your modified adjusted gross income, add half of your Social Security benefits and add all of your tax-exempt interest.

If you’re married and file taxes jointly, here’s what you’ll be looking at:

  • If your provisional income is less than $32,000 ($25,000 for singles), there’s no tax on your Social Security benefits.
  • If your income is between $32,000 and $44,000 ($25,000 to $34,000 for singles), then up to 50% of your Social Security benefits can be taxed.
  • If your income is more than $44,000 ($34,000 for singles), then up to 85% of your Social Security benefits are taxable.

The IRS has a handy calculator that can help you determine whether your benefits are taxable. You should also check out Calculating Taxes on Social Security Benefits.

And don’t forget state taxes. In most states (but not all!), Social Security benefits are tax-free.

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Withdrawals from Roth IRAs

picture of a jar labeled &quot;Roth IRA&quot; with money in itpicture of a jar labeled &quot;Roth IRA&quot; with money in it

Question: Are withdrawals from Roth IRAs tax-free once you retire?

Answer: Yes. Roth IRAs come with a big long-term tax advantage: Unlike their 401(k) and traditional IRA cousins—which are funded with pretax dollars—you pay the taxes on your contributions to Roths up front, so your withdrawals are tax-free once you retire. One important caveat is that you must have held your account for at least five years before you can take tax-free withdrawals. And while you can withdraw the amount you contributed at any time tax-free, you must be at least age 59½ to be able to withdraw the gains without facing a 10% early-withdrawal penalty.

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Taxation of Annuity Income

picture of an elderly couple discussing finances with an advisorpicture of an elderly couple discussing finances with an advisor

Question: Is the income you receive from an annuity you own taxable?

Answer: Probably (at least for some of it). If you purchased an annuity that provides income in retirement, the portion of the payment that represents your principal is tax-free; the rest is taxable. The insurance company that sold you the annuity is required to tell you what is taxable. Different rules apply if you bought the annuity with pretax funds (such as from a traditional IRA). In that case, 100% of your payment will be taxed as ordinary income. In addition, be aware that you’ll have to pay any taxes that you owe on the annuity at your ordinary income-tax rate, not the preferable capital gains rate.

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Age for Starting RMDs

picture of elderly man blowing out candles on a birthday cakepicture of elderly man blowing out candles on a birthday cake

Question: At what age must holders of traditional IRAs and 401(k)s start taking required minimum distributions (RMDs)?

Answer: Age 72. The SECURE Act raised the age for RMDs to 72, starting on January 1, 2020. It used to be 70½. (Note that, although the CARES Act waived RMDs for 2020, they’re back for 2021 and beyond.)

As for the amount that you are forced to withdraw: You’ll start out at about 3.65%, and that percentage goes up every year. At age 80, it’s 5.35%. At 90, it’s 8.77%. Figuring out the percentages might not be as hard as you think if you try our RMD calculator. (Note that, beginning in 2022, RMD calculations will be adjusted so that distributions are spread out over a longer period of time.)

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RMDs From Multiple IRAs and 401(k)s

picture of a spiral notebook with &quot;Required Minimum Distributions&quot; written on the front coverpicture of a spiral notebook with &quot;Required Minimum Distributions&quot; written on the front cover

Question: Are RMDs calculated the same way for distributions from multiple IRAs and multiple 401(k) plans?

Answer: No. There’s one important difference if you have multiple retirement accounts. If you have several traditional IRAs, the RMDs are calculated separately for each IRA but can be withdrawn from any of your accounts. On the other hand, if you have multiple 401(k) accounts, the amount must be calculated for each 401(k) and withdrawn separately from each account. For this reason, some 401(k) administrators calculate your required distribution and send it to you automatically if you haven’t withdrawn the money by a certain date, but IRA administrators may not automatically distribute the money from your IRAs.

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Due Date for Your First RMD

picture of a piggy bank with &quot;RMD&quot; written on the sidepicture of a piggy bank with &quot;RMD&quot; written on the side

Question: Do you have to take your first RMD by December 31 of the year you turn 72?

Answer: No. Normally, you have to take RMDs for each year after you turn age 72 by the end of the year. However, you don’t have to take your first RMD until April 1 of the year after you turn 72. But be careful—if you delay the first withdrawal, you’ll also have to take your second RMD by December 31 of the same year. Because you’ll have to pay taxes on both RMDs (minus any portion from nondeductible contributions), taking two RMDs in one year could bump you into a higher tax bracket.

It could also have other ripple effects, such as making you subject to the Medicare high-income surcharge if your adjusted gross income (plus tax-exempt interest income) rises above $88,000 if you’re single or $176,000 if married filing jointly. (Note: Those are the income thresholds for determining 2021 surcharges.)

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Taxation of Life Insurance Proceeds

picture of a life insurance contract with money laying on itpicture of a life insurance contract with money laying on it

Question: If your spouse dies and you get a big life insurance payout, will you have to pay tax on the money?

Answer: No. You have enough to deal with during such a difficult time, so it’s good to know that life insurance proceeds paid because of the insured person’s death are not taxable.

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Estate Tax Threshold

picture of the words &quot;Estate Tax&quot; next to a judge's gavel and moneypicture of the words &quot;Estate Tax&quot; next to a judge's gavel and money

Question: How valuable must an individual’s estate be at death to be hit by federal estate taxes in 2021?

Answer: $11.7 million ($23.4 million or more for a married couple). If the value of an estate is less than the threshold amount, then no federal estate tax is due. As a result, federal estate taxes aren’t a factor for very many people. However, that will change in the future. The 2017 tax reform law more than doubled the federal estate tax exemption threshold—but only temporarily. It’s schedule to drop back down to $5 million (plus adjustments for inflation) in 2026. Plus, during his 2020 campaign, President Biden called for a reduction of the exemption threshold sooner.

If your estate isn’t subject to federal taxes, it still might owe state taxes. Twelve states and the District of Columbia charge a state estate tax, and their exclusion limits can be much lower than the federal limit. In addition, six states impose inheritance taxes, which are paid by your heirs. (See 18 States With Scary Death Taxes for more details.)

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Standard Deduction Amounts

picture of a 1040 tax form with a pen laying on it next to the standard deduction linepicture of a 1040 tax form with a pen laying on it next to the standard deduction line

Question: If you’re over 65, can you take a higher standard deduction than other folks are allowed?

Answer: Yes. For 2021, to the standard deduction for most people is $12,550 if you’re single and $25,100 for married couples filing a joint tax return ($12,400 and $24,800, respectively, for 2020). However, those 65 and older get an extra $1,700 in 2021 if they’re filing as single or head of household ($1,650 for 2020). Married filing jointly? If one spouse is 65 or older and the other isn’t, the standard deduction increases by $1,350 ($1,300 for 2020). If both spouses are 65 or older, the increase for 2021 is $2,700 ($2,600 for 2020).

Source: kiplinger.com

2017 Financial Predictions (and what it means for our wallets)

As we ring in the New Year, financial resolutions top our to-do lists, from saving more to finding a new, better-paying job and getting out of debt once and for all.

As you map out your next money move, take heed of some of these top market and economic predictions for added guidance.

Higher Borrowing Costs

Looking to open a new credit card or apply for a mortgage this year? It may be wise to act sooner than later.

With the broader economy improving since the financial crisis (e.g. the national unemployment rate is hovering at 5%, down from nearly 10% in 2009), economists, including Janet Yellen, chairwoman of the Federal Reserve, believe it’s time for a tightening of monetary policy (translation: boost interest rates to curb inflation.)

Fortune Magazine’s “Crystal Ball,” says we can expect a three-quarter-point increase by next Thanksgiving to 1.25%.

When the Fed raises the overnight bank-lending rate (aka the Fed Funds rate) that typically has a domino effect on interest rates for other mainly short-term financial products like credit cards and car loans.

What this means for us? If you’re in the market to borrow money, I recommend reviewing your credit ahead of any applications to see what improvements (if any) are necessary. The higher your credit score, the better chances you have of achieving the lowest interest rates on the market.

If you’re seeking to refinance or buy a home this year, also aim to lock in a rate as soon as possible. While an increase in the Fed Funds rate isn’t necessarily a precursor to higher mortgage rates, we’re already seeing an uptick on 30-year home loans to above 4%. And Fannie Mae’s National Housing Survey shows that more than 50% of consumers think mortgage rates will continue to elevate over the next year.

Finally, for those of us with adjustable rate loans (e.g. some student loans and mortgages) we may want to pay off our debt more aggressively or refinance to a fixed-rate loan to put a lid on rising monthly payments down the road.

Less Sticker Shock in Housing

With home loan rates expected to track north, home values may see some cooling in 2017. That’s because when mortgage rates jump, demand for housing tends to slowdown, placing pressure on sale prices.

Not to mention, after riding a hot streak in recent years with prices across the country hitting near pre-recession levels, real estate experts at Zillow.com now predict a “normalizing” market with more moderate price growth of 3.6% across the country in 2017, compared to 4.8% last year.

Prepare for more affordability in areas that have experienced the steepest gains. In Los Angeles, for example, home prices have trended considerably higher in recent times (up 7.3% over the past year, alone). In 2017, though, the city can expect a tempering of home values to a growth of just 1.7%, according to real estate website Zillow.com.

As for rentals, after double-digit surges, rents in many large metro areas will also see slower growth in 2017, per Zillow. Rents across the country are expected to rise approximately 1.7 percent this year to about $1,429 per month, down from a 6% appreciation reported last year.

Partly to blame for the cool down in rent is a glut in inventory. Builders were very busy over the last few years, but the demand for new units in some hot neighborhoods like Brooklyn, N.Y. is failing short of supply.

As a result, some landlords at higher end luxury apartment buildings in that borough have been striking sweet deals with renters since last summer, The New York Times reports.  For example, at 7 DeKalb, a new high rise in Brooklyn, “the landlord is offering two months of free rent with a 14-month lease, and use of the building’s fitness center and other amenities for a year without charge.”

That’s a good reminder to prospective renters everywhere that it can never hurt to negotiate, especially this year!

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at Farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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Source: mint.intuit.com

Which Retirement Plan Is Right for Me?

At some point, most of us realize that we need to start saving for retirement. For some, it comes from seeing the struggle of a parent or a grandparent trying to make ends meet on Social Security alone. For others, it comes from a vision of a great retirement, or even retiring early. In any case, saving for retirement is a vital part of almost everyone’s financial journey.

The process of actually saving for retirement isn’t so clear, however. There are options in abundance out there for most people to save for retirement. Virtually all Americans have access to traditional IRAs, and most Americans have access to a Roth IRA, too. Many Americans also have workplace retirement plans, and there’s always the ability to just put your money in an ordinary investment account.

How does a person navigate these options? What’s the difference between them? Let’s dig in.

In this article

It’s the taxes!

Almost all retirement accounts for individual savers have a few key features in common. You deposit money from somewhere, either directly from your paycheck or your checking account, and you usually agree to have this done automatically on a regular schedule. You choose investment options for that money. Then, it sits there until you need it in retirement (or in a serious financial crisis).

The big difference between the various retirement account options is taxes. Here’s how.

Taxes in a normal investment account

Investment accounts are set up directly with an investment firm, like Fidelity, Vanguard, Charles Schwab or Edward Jones. In a normal investment account, you deposit money directly from your checking or savings account. Remember, money in your checking account or savings account is money you’ve already paid income taxes on (or soon will). Once the money is in an investment account, you choose how it’s invested: stocks, bonds, index funds, whatever you like.

As long as you leave it alone and let it grow without selling it, you don’t owe taxes on that investment. However, it may generate income for you in some way, such as dividends. You will owe taxes on dividends and other income in the year in which you earn it.

When you sell an investment in a normal investment account, you owe taxes on how much you earned from the sale. So, if you initially bought an investment for $5,000 and you sell it for $8,000, you’ll owe income taxes on the $3,000 you made, even if you immediately invest it in something else. This is called capital gains, and it’s taxed at the current capital gains tax rate. As of 2020, short term capital gains (investments you held for less than a year) are taxed at a normal income rate, while long term capital gains are taxed at a lower rate.

  • Pros: Very simple, no requirements, you pay lower taxes on investments you hold for more than a year
  • Cons: Dividends and other income are taxed as you earn them, no other tax benefits

Taxes in a traditional 401(k)/403(b)

For many people, the easiest option for retirement savings is a workplace retirement account, usually called a 401(k), 403(b), or TSP. These plans work similarly.

With this type of account, money is taken out of your paycheck before taxes. This means that your taxable income goes down for the year if you use this type of retirement plan. You’ll bring home a smaller paycheck (because some of it goes directly into your retirement account), but the reduction in your paycheck will be less than the amount you contribute (because you owe less taxes this year). Some employers actually match your contributions up to a certain amount, immediately adding 50% to your money or even doubling your money.

Once the money is in the account, it’s invested according to your instructions when you set up the account. If investments in your account earn income, it stays within the account and is reinvested according to your instructions and you do not owe taxes on that money. The only time you owe taxes on a traditional 401(k) or 403(b) account is when you withdraw money.

If you withdraw money from this account when you retire, it’s treated like normal income and it’s taxed just like you would see if it were a normal paycheck. Usually, taxes are withheld as you withdraw the money to make filing your taxes easier at year’s end. The advantage is that usually in retirement your income level is lower, so the amount taken out for taxes is much smaller.

The contribution limit for the 401(k) and 403(b) is quite high, at $19,500, with a $6,500 additional catchup if you are 50 or older.

  • Pros: The simplest option for those who have it, you can rebalance without tax worries, your tax rate in retirement is likely to be much lower than it is during your career, your employer might match contributions
  • Cons: Withdrawals are taxed as regular income; if you take money out of the account before retirement, there can be a 10% additional penalty

Taxes in a traditional IRA

Another option to consider is a traditional IRA. You can set up a traditional IRA on your own at an investment firm. You deposit money into the account from your checking account and choose how it’s invested. Once money is in the account, you can buy and sell it as you desire without any tax consequences, which means you can rebalance as you desire. Also, any income that your investments might earn stays within the account and isn’t taxed until you withdraw it.

One advantage of a traditional IRA is that your contributions to it are tax deductible, provided you meet the income limit. So, if you’re claiming individual deductions on your taxes (for most people, this usually happens while they’re paying off a home mortgage), you might be able to also deduct your traditional IRA contributions.

IRAs have an annual contribution limit. In 2021, that limit is $6,000, or $7,000 if you’re 50 or older. This is a limit across all of your IRAs, traditional or Roth.

When you withdraw money from a traditional IRA when you are retired, the withdrawn money is taxed as normal income, just like withdrawals from a 401(k) or 403(b). However, as noted there, your taxable income level should be lower in retirement, and thus you’ll pay a low tax rate.

  • Pros: Easy to set up, you can rebalance without tax worries, your tax rate in retirement is likely to be much lower than it is during your career, you may be able to deduct contributions in the year you made those contributions if you have enough other deductions
  • Cons: Withdrawals are taxed as regular income; if you take money out of the account before retirement, there can be a 10% additional penalty

Taxes in a Roth IRA

A Roth IRA is much like a traditional IRA, with a few key changes. Roth IRAs are available at most investment firms and you can easily set one up yourself. As with a traditional IRA, you make contributions from your checking account. However, your contributions are not tax deductible, which is only really important if you have a lot of other deductions anyway.

Once your money is in a Roth, you can buy and sell investments within the account without tax penalty, and any dividends or other income you earn don’t trigger taxes, either.

IRAs have an annual contribution limit. In 2021, that limit is $6,000, or $7,000 if you’re 50 or older. This is a limit across all of your IRAs, traditional or Roth. Furthermore, you can only contribute to a Roth IRA if your income level is low enough. In 2021, the limit for partial contribution is $140,000 of modified adjusted gross income (MAGI) for single filers and $208,000 for joint filers.

It’s when you withdraw money from a Roth that they really become amazing. For starters, you can withdraw your contributions at any time without penalty, so if you’re in a pinch, you can get those contributions back (though you can’t later decide to put old contributions back into the account again). Here’s the real amazing part, though: When you’re of retirement age (59 1/2 or older), you can withdraw your earnings from a Roth IRA, and it’s not taxable income

A Roth IRA can be a good option if you anticipate having more income when you retire or if you anticipate a rise in taxes.

  • Pros: Roth IRAs are easy to set up, you can rebalance without tax worries, you can withdraw contributions without penalty, no taxes on gains if withdrawn in retirement
  • Cons: Income limit, limit on annual contributions, contributions not tax deductible

Which option should you choose?

If you have a workplace retirement plan and your employer offers matching contributions, that’s going to be your best option every time. Contribute enough to that plan to get every dime of matching. That matching money blows away the tax benefits from other accounts.

There’s also the Roth IRA; contribute as much as you can, up to the annual limit. If you want to contribute more, use your workplace retirement plan, if available.

Or consider a traditional IRA. In this situation, it’s very similar to your workplace retirement options, but you’ll likely have more and better investment options. If you want to contribute more than the IRA annual limit, use your workplace retirement plan, if available.

Only use a normal investment account for retirement if no other options are available to you.

This content is for informational purposes only and is not intended as professional advice. We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Think It’s Too Early To Plan For Retirement? Wrong!

Golden years require some gold.

Are you saving for retirement? You should be, even if your golden years are more than half your lifetime away. The sooner you begin, the less you’ll need to save each month.

Too many people have no idea how much they’ll need to live comfortably through retirement. According to the 19th Annual Transamerica Retirement Survey, 46 percent of respondents guessed how much money they’ll need to live comfortably in retirement. In contrast, only 22 percent made their estimate based on their current living expenses.

It’s never too late to start saving, and it’s also never too early. But you’ll need a budget to show how far you’ve come and where you’re headed. Learning how to start saving for retirement is important for everyone. There are plenty of ways you can save for retirement—401(k) accounts, IRA accounts, savings accounts, and so forth.

Below, we’ll go over how to save for retirement, the best way to save for retirement, when to start saving for retirement, and more. You can use the list below to jump to a section you’re curious about, or you can read through for a more thorough understanding of saving for retirement. Take a look!

Step One: Calculate How Much Retirement Savings You’ll Need

Expenses might not be the same at retirement. Maybe your home will be paid off by then, but the cost of living will certainly be higher. If you want to travel, you’ll need more savings. Calculating retirement funds takes a lot of consideration. The safest approach is to err on the generous side since having more than you need can never be a bad thing.

When it comes to saving money for retirement, it’s a good idea to start by differentiating your wants and needs. Sure, a Masserati and beachfront property sounds like a great way to enjoy your sunset years, but will you have enough money to pay for utilities, property taxes, and food?

The Department of Labor estimates that you need roughly 70 to 90 percent of your preretirement income to live comfortably in retirement. Budgeting for retirement can help you determine how much money you need to have saved in order to live comfortably and maybe even splurge on something new, like a vacation to Europe or a pontoon boat for the lake.

Start your retirement fund by determining your retirement savings goals. Retirement savings calculators, such as the one made by Kiplinger, does most of the work for you. It includes fields to include the amount you are scheduled to receive in Social Security benefits and investments. Fill in the blanks, and the calculator shows their estimated  amount that you’ll need to have in your retirement savings.

Other ways to determine your retirement savings goals include consulting with a financial advisor, filling out a budgeting worksheet, or enlisting the help of an  online budgeting tool, like the Mint app.

Different Retirement Accounts

As you calculate how much retirement savings you’ll need, it’s essential to know your options on where to save your money. Many experts suggest you save at least 15 percent of your pre-tax income every year in order to have the recommended 70 percent replacement rate.

Many retirement accounts place limits on how much you can save up each year, but there are a few different retirement accounts where you can contribute 15 percent of your salary annually.

  • 401(k): A 401(k) is a retirement account that’s set up by an employer that allows workers to contribute a portion of their wages to the account. Earnings made through a 401(k) account aren’t taxed until they are withdrawn in retirement. Some employers also offer a 401(k) match, where they will match all, or a portion of your contributions.

To get the most out of your 401(k) plan, invest up to the match and aim to reach the contribution limit—as long as you can do so comfortably. The annual contribution limit in 2019 is $19,000. If you’re 50 years or older, you’re granted a catch-up contribution of $6,000, meaning you can contribute $25,000 to your 401(k).

  • Traditional IRA: A Traditional IRA is a retirement account that allows you to make contributions that will be deducted from your taxes during that year. Once you withdraw money from your Traditional IRA during retirement, you will have to pay income taxes.

Each year, you can contribute up to $6,000 to your Traditional IRA, and $7,000 if you’re 50 years old or older. To get the most out of your retirement savings, aim to reach the contribution limit.

  • Roth IRA: A Roth IRA and Traditional IRA are very similar. The main difference is that with a Roth IRA, your contributions aren’t deductible during the tax year you make the contribution. However, this means that when you withdraw funds from your Roth IRA in retirement, they won’t be taxed.

As with a Traditional IRA, the contribution limit for 2019 is $6,000 and $7,000 if you’re aged 50 or older. Aim to contribute $6,000 to get the most out of your retirement.

Contributing 15 percent of your annual salary towards retirement savings may seem like a daunting task at first, but you may be closer than you think.

If you contribute 5 percent of your salary to your 401(k) and your employer provides a 5 percent match, you’re already at 10 percent. And if you’ve reached the contribution limit for your Traditional or Roth IRA and still haven’t reached 15 percent, you can go back to your 401(k) and contribute the rest there, as long as you don’t exceed $19,000. If you have an old 401(k) account, you can also get an IRA rollover and put those funds into an IRA account while maintaining the tax-deferred status of your investments.

How Much Money You Should Have Saved by Age

The most pressing question many people have is when to start saving for retirement. Remember, as we previously said, it’s never too late or too early to plan for retirement. The best way to save for retirement, however, is to begin early. This means you won’t have to contribute as much money later on in life.

Here’s how much your retirement savings should be by age, according to a report by T. Rowe Price:

  • Age 30: ½ times your salary
  • Age 35: 1 times your salary
  • Age 40: 2 times your salary
  • Age 45: 3 times your salary
  • Age 50: 5 times your salary
  • Age 55: 7 times your salary
  • Age 60: 9 times your salary
  • Age 65: 11 times your salary

Step Two: Create a Budget to Save for Retirement

Retirement calculators usually produce an enormous dollar amount. Replacing 80 percent of a modest yearly salary might require a million dollars in savings or much more if there are no other anticipated sources of income. That’s a lot of savings, but spreading it out over many years means your monthly contribution won’t be as much.

A retirement calculator can assist you with saving for retirement. To create a budget to save for retirement, keep these factors in mind:

  • Fixed expenses: These are recurring expenses that don’t change. Examples of fixed expenses include rent, monthly bills for services like cable, gym memberships, and cell phones, along with insurance and taxes. Knowing the fixed expenses you’ll have during retirement will allow you to calculate how much money you’ll need to get by.
  • Leisure: Retirement is a time for you to pursue your passions and hobbies. Whether it’s traveling the world or picking up golf, set aside an estimate for how much money you’ll need for fun and hobbies.
  • Medical costs: Unfortunately, with old age comes an increased probability of health concerns. If you retire before 65 when you’re eligible for Medicare, you may have to pay for your health insurance. Make sure you create an emergency fund for medical expenses in case any health concerns pop up.

Once you have all of your expenses tallied up, you’ll be able to determine how much money you’ll need for retirement.

Now’s the time to find extra money in your budget to devote to retirement, but sometimes there doesn’t seem to be anything left after the bills are paid. That’s where budget software, such as Mint.com products, can help.

By opening an account and entering all of your financial information, Mint products can help you find money and suggest ways to allocate it to savings. For example, an overview of your expenses and income might reveal an imbalance that you can correct.

Mint.com can expose spending patterns that you weren’t aware of, and show you how they add up monthly. Mint can also make suggestions if you’re spending too much in interest based on another lender or credit card that offers a lower rate. Every penny you find can turn into valuable retirement savings.

Now is the best time to get on track.

Step Three: Consider Investments to Supplement Retirement Savings

As the old saying goes, your money should work for you. Putting money in a cookie jar leaves exactly the amount saved. In an interest-bearing savings account, there could be slightly more over time. If you really want to watch your money grow, think about investing.

Investments always carry risk, but some are much riskier than others. When you are young, those chances are easier to take. There are still years ahead to recover from stock market drops and other losses. As you grow closer to retirement, you might consider switching to less risky investments to keep your money safer.

Additional Tips for Saving Money for Retirement

Contributing money to employer-sponsored 401(k) plans and IRAs aren’t the only options you have for saving money for retirement. Aside from investing your money, you can make a few lifestyle changes to increase your nest egg. Dol.gov offers an excellent publication on planning for retirement with worksheets and information on budgeting for retirement and tracking down expenses.

Additional steps you can take to save money for retirement include:

  • Tracking your spending: With a budgeting app like Mint, you can track your spending to see where your money is going. Avoid spending money on non-essential items, such as going out to a fancy dinner every night or subscribing to every streaming service offered online. You’ll be surprised how much you can save by eliminating impulse buys and expensive services.
  • Taking advantage of your health savings account (HSA): If your employer offers a high deductible health plan (HDHP) that comes with an HSA, you may consider contributing up to the contribution limit of $3,500 (individual) or $7,000 (family. Why? HSAs can cover your current and future medical costs, and funds go straight from payroll to your account. HSA contributions are also pre-tax and tax-deductible, meaning when you make a withdrawal for a qualified expense, you won’t be taxed.
  • Paying off your debts: Being in debt can cost you a lot of money. Not only is the principal balance something to worry about, but the interest you accumulate can be harmful, too. Paying off your debts as soon as possible, such as credit card debt, your mortgage, student loans, and auto loans will allow you to put more money towards retirement rather than compounding interest.

Key Takeaways on Saving for Retirement

  • Many Americans aren’t fully prepared for retirement and don’t have enough money saved up to live comfortably after they retire.
  • It’s recommended to contribute at least 15 percent of your salary every year to your retirement accounts.
  • The best way to save for retirement is by taking advantage of the many savings accounts out there, such as 401(k) accounts and IRA accounts.
  • For traditional retirement accounts, your taxable income will be reduced based on the amount of your contributions, giving you a nice tax break. Roth accounts, on the other hand, will collect taxes on your contributions when you make them but will allow you to withdraw money tax-free in retirement.
  • Budgeting for retirement in advance can help you stay on track for your savings goals.
  • Investing in stocks and diversifying your portfolio is a great way to supplement your retirement savings.
  • Tracking your spending, taking advantage of your health savings account, and paying off your debts are additional ways you can save for retirement.

Retirement is meant to be enjoyed. Learning how to save money for retirement can help you live your retirement years to the fullest. The best way to get the most out of your retirement savings is by planning ahead and committing to those plans over the long haul.

Mint.com offers budget products that help make budgeting and saving simple, so you can be sure you’re always on top of the game.

Sign up for a free account today and see how Mint.com can help your retirement plans.

Sources: Transamerica Institute | Department of Labor | Kiplinger | Investopedia | Center for Retirement Research at Boston College | IRS | T. Rowe Price | The Balance | U.S. Department of Health and Human Services | U.S. News and World Report |

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Here’s When Social Security Recipients Get $1,400 Stimulus Checks

If you receive Social Security or SSI and you haven’t received your third stimulus check, your wait is almost over. The IRS just announced that most payments for people who receive federal benefits and aren’t required to file a tax return will be made Wednesday, April 7.

The April 7 payment date applies to those who get benefits from Social Security retirement and disability, Supplemental Security Income and the Railroad Retirement System. A payment date for those who get VA benefits hasn’t yet been announced.

Why Are Social Security Recipients Still Waiting?

If you file a tax return and receive benefits, chances are good that you’re among the 127 million Americans who have already gotten their $1,400 stimulus checks. But about 30 million recipients of Social Security and other benefits are still waiting on stimulus money.

That’s because the IRS is processing stimulus payments using 2019 and 2020 tax returns. But just as with the first two rounds of payments, the IRS didn’t require recipients of Social Security and other benefits to file a tax return if they weren’t otherwise required to. Instead, the IRS got the information it needed from the appropriate agency.

This time around, the IRS was waiting on Social Security and other agencies to provide updated direct deposit information and addresses for recipients. On March 25, after the House Ways and Means Committee issued a 24-hour ultimatum, the Social Security Administration provided the updated information. The VA and Railroad Retirement System provided the information earlier last week.

For recipients of VA benefits, the IRS news release announcing payment dates says: “The IRS continues to review data received for Veterans Affairs (VA) benefit recipients and expects to determine a payment date and provide more details soon. Currently, the IRS estimates that Economic Impact Payments for VA beneficiaries who do not regularly file tax returns could be disbursed by mid-April.”

Do I Have to Do Anything to Get My Check?

Probably not. If you received the first two checks, you’re probably in line to get this one, too. The only thing you can do right now is wait.

One exception: If you have dependents, you may need to file a tax return, because the IRS may not get dependent information directly from Social Security or another agency. This time around, you’ll get $1,400 for each dependent, regardless of their age. If you have dependent children, submitting a return could also help you get a child tax credit of $3,600 for children younger than 6 or $3,000 for children 17 and younger.

You may not receive money on behalf of your dependent with your check. If you don’t get it with your check, the IRS will send you the extra money once it processes your return.

You can expect to receive your third stimulus check however you get your federal benefits, either through direct deposit or a Direct Express Debit Mastercard. If you’ve closed the bank account the IRS has on file, your bank will reject the deposit and you’ll get your payment in the mail.

Can I Track My Stimulus Check Yet?

If you receive federal benefits and don’t file a tax return, not yet. The IRS Get My Payment tool will be updated the weekend of April 3-4 for benefit recipients who are getting paid on April 7.

The information is updated once a day. Avoid multiple log-ins, as you may get locked out for 24 hours.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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Source: thepennyhoarder.com

What to Do With Your 401(k) During a Stock Market Crash

You know the story of “The Tortoise and the Hare”? It turned out slow and steady won the race.

That applies to investing, too.

Last year, as the Dow Jones Industrial Average rose and fell daily — and even hourly — to the economic effects of COVID-19, the financial roller coaster ride left plenty of investors feeling a bit queasy.

If you had a 401(k) or IRA, you may have felt your own steep drop in the pit of your stomach. As it turned out, though, the 2020 stock market crash — and more importantly, the subsequent recovery — provided a good lesson in playing the long game as an investor.

Here’s what you need to keep in mind if you’re inclined to panic about your 401(k) amid turmoil in the stock market.

How Your Retirement Investments Work

To understand why you shouldn’t panic too much about your retirement accounts, you need to know how they work.

A 401(k) is an employer-sponsored investment plan while Individual Retirement Accounts — either traditional or Roth IRA — are typically set up by the individual to invest money toward retirement.

If it’s a 401(k) or traditional IRA, you get the tax benefit up front and pay when you withdraw; with a Roth IRA, the withdrawals are tax-free. Either way, by adding money on a regular basis, these accounts let you grow your nest egg that you can live on in your retirement.

In the beginning, you’ll have more time to take risks on investments — like stocks — and when you get closer to retirement age, you’ll shift investments to less-risky categories like bonds and cash that don’t lose their value during a market slump.

So even if there’s a dip in the stock market, you’ll have time to recover if you’re younger and you’ll be better protected from fluctuations as you near retirement.

What to Do With Your 401(k) During a Slump

Watching your 401(k) balance take a tumble isn’t anyone’s idea of fun. We get it.

But a down market is not a time to panic, according to Certified Financial Planner Holly Donaldson of St. Petersburg, Florida.

That’s because the cash component of your account, as well as the contributions you should absolutely continue to make, can be used to buy up more funds at rock-bottom prices.

So selling is the last thing you want to do because you’d be locking in your losses.

In fact, Donaldson suggests ignoring your newsfeed if it puts you in a panic about your retirement accounts.

“What I advise is you use the calendar and not the news,” said Donaldson, who suggested checking in with your portfolio on a quarterly basis rather than a daily one.

Pro Tip

Even if your account balance takes a nosedive, don’t withdraw your money from an IRAor 401(k) — the penalties for early withdrawal are substantial.

She noted that it typically takes the stock market one to two years to correct itself, so a single day — or even a few weeks — of volatility should not change your long-term strategy.

Don’t try to time your investments. Instead, use dollar-cost averaging, which means you invest on a regular schedule no matter what’s happening in the stock market.

Avoiding the stress of hourly updates on your investments is key to not only a balanced financial portfolio but your mental health, too.

“If a 27-year-old wants to increase their chances of suffering chronic anxiety, then yeah, sure, look at your 401(k) every day,” she said.

And even if you’re closer to retirement, Donaldson recommended talking to a financial planner or speaking to your employer’s 401(k) representative to ensure your portfolio has the right mix of stocks, bonds and cash.

Slow and steady. Wins it every time.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

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When You Have To Retire due to COVID-19

Here’s a stunning fact: The Bureau of Labor Statistics reports that unemployment during the pandemic for workers 55 and older jumped from 3.3% in March 2020 to 13.6% in April 2020. The numbers settled down in the later months, but the question remains: What happened to those older workers laid off from April to July, when the rate remained a high 8.7%?

This type of extended unemployment or forced retirement can cause people to fall completely off the career ladder in their field, leaving them in a difficult spot where they rely on their limited remaining unemployment benefits as they figure out what’s next.

The exact path forward from forced early retirement isn’t the same for everyone. Some people may choose to completely retire and live off their retirement savings and Social Security. Others may chart some way to re-enter the workforce. Let’s take a look at some of the options available to folks who found themselves in forced early retirement due to COVID-19.

In this article

Six steps to take after getting laid off

This situation presents a spectrum of options, ranging from trying to get back into your previous field, looking for a parallel field into which you can transfer skills, starting over professionally, or simply retiring for good.

Lean in on personal and professional relationships

If you’re hoping to stay in your current field, job searching is an obvious next step, but don’t just spend your time looking at Indeed and other job listing sites. Instead, reach out to people that you have worked with and had a positive relationship with in the past and see what opportunities they may know about.

Do your contacts know of any jobs in your previous field that you might be a good fit for? Are they willing to provide a reference to you if you seek a new job in this field or a related field? Can they recommend you internally for any open positions?

Often, the path out of an unwanted early retirement back into your old career path is through an old contact. That personal connection matters, both between you and that person and between that person and the job you may be able to get.

Consult or freelance

If you want to stay in your current field but there aren’t any employment opportunities available to you, consider using your skills for freelancing or consulting work. While this may not be the outcome you desire, as freelancing and consulting work comes with fewer professional benefits, it does allow you to keep your feet in the field and keep income coming in.

If you’re looking for quick and very simple freelancing opportunities, consider looking at Fiverr, which will provide small but simple freelancing jobs. For more challenging and more lucrative opportunities, take a look at Upwork. You may also want to look at any consulting opportunities with previous employers as a starting point.

Evaluate your skills

If you don’t have any such opportunities available to you, this may be an opportunity to step back and evaluate your skills from the perspective of considering what fields might actually be a good fit for you. What fields are open to you with the skills you’ve acquired in your previous career?

For example, although I was once in the data mining profession, I spent a lot of my professional time on documentation, report writing, and communication with collaborators. Those skills set me up for a new career path as a freelance writer.

Step back and look at the skills you’ve accumulated and ask yourself what career paths those skills might be a great fit for. You might find that the things you’ve learned lead you to a completely different destination.

Start a new career

If it appears as though your old career path is a dead end, it may be time to consider a new career entirely.

A good first step here is to take some skills assessments. Minnesota State University provides a great list of skills assessments for people considering a career path. These will often clearly illustrate what natural talents and skills you have and can point you toward some careers you might be suited for.

From there, you can assess some entirely new career options. Do you need further education? Do you need to go to a trade school? Maybe you just need to do some independent learning.

Downsize your lifestyle

From a practical perspective, unexpected forced early retirement likely means that you need to downsize your lifestyle. In the short term, you likely made a bunch of easy decisions about your spending choices, but if this is a more permanent change or one that will last years, you should start considering bigger changes.

Start with housing. Can you move to a smaller home or into an apartment? Can you share your living space with someone else in order to offset some of the costs? For transportation, do you need a car or can you get by with mass transit options, bicycling, and/or carpooling? Do you need a data plan for your cellphone? What about cable?

When you chop away a bunch of bigger expenses, suddenly the challenge of figuring out how to financially make it on a lower income becomes much easier.

Recalibrate your investments (if you have them)

If you’re fortunate enough to have investments put aside for retirement, the moment at which you’re forced into early retirement is a moment to consider recalibrating your investments into “retirement mode.” The reason is that, in effect, you’ve become a retiree who wants to be able to live off of those investments for as long as possible, and thus retirement requires a different investment strategy than trying to grow wealth over the long term.

How does a retiree approach investing, then? Someone who is more than 10 years from retirement doesn’t plan to withdraw anything over that period, so they’re likely invested in a very aggressive way. A fresh retiree will likely need to make withdrawals in the next 10 years, so that money should be invested in a more stable fashion with less volatility.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

What is a Continuing Care Retirement Community?

As people get older, the idea of slowing down and living out their days in an old folks’ home isn’t part of their life plan.

Understanding why a move may be necessary and what types of care and facilities are available can make it easier for them and their adult children.

Benefits of a continuing care retirement community

There’s not one medical diagnosis that determines whether someone needs to move into a continuing care facility. In many cases, it’s based on the physical assistance that somebody might need or on personal safety. Life situations may dictate what you can do, what you can afford and what you may need.

That’s what makes a continuing care retirement community so great. It provides one campus with every type of retirement community out there, so an aging adult can make one move and continue on in the same place as their needs change.

Here are the types of care options you will find at a continuing care community.

1. Active adults

For those who are retired and still very active and involved with their communities, an active adult community might be a great transition when they’re ready to move from their homes.

It’s ideal for those who don’t need help with daily life but still want the benefits of living in a community, such as sharing meals they don’t have to cook and attending concerts, art classes, lectures, movies, discussion groups and book clubs.

This type of arrangement helps residents feel less isolated because they’re engaged and connecting with others. They’re living in a community with people who share their interests and for many people, that’s better than living at home alone.

2. Assisted living

Whereas independent living is great for those who crave community but don’t need assistance, assisted living services are available for those clients who do need assistance with chores, like showering, getting around or medical care.

Assisted living facilities help residents with medication management and provide a more scheduled environment. In many cases, those living on their own may not be getting the nutrition in their diets that they need. By moving to an assisted living community, they can have their medication administered by nurses or licensed aide residents and get help with meals, cleaning and personal care.

For many, it’s not just about health concerns. Socialization is an important aspect of this type of retirement community as it helps extend their quality of life, especially when their health falters.

3. Memory care

Other residents need more specific care, such as those living with Alzheimer’s or another form of dementia. In those cases, a memory care facility is a good option. Since those living with Alzheimer’s or dementia can become agitated, confused, aggressive or depressed, memory care facilities and their staff can provide a structure that helps minimize those symptoms.

In addition to getting the care they need by staff who know how to communicate and work with people with dementia, residents have a chance to socialize and engage in activities where their options at home may be more limited and lonelier. Having a routine that’s predictable and comforting can help residents living in memory care facilities.

Choosing a community

It’s worth noting that not all continuing care retirement communities are created equally.

When choosing a facility, consider staff-to-resident ratio, outcomes, the medical director, therapy plans and dining programs. Some residents may need a more restrictive diet, for example, and it’s important to know whether the facility can easily accommodate those needs.

Also, every retirement community is different in terms of the levels of care it provides and its fee structure. While some independent and active residents might feel different levels of care aren’t important, understanding what’s available in different communities is important for long-term planning.

Look at the physical layout of centers, too. Some retirement homes might separate assisted living residents to a specific part of the building or floor while others don’t.

Many older individuals stand to benefit from the care retirement communities provide, whether a resident needs assistance with specific healthcare concerns or prefers a more independent lifestyle.

Before they pack their first box, it’s important to consider what they really need to make sure they find their right home. This will make it easier for everyone, both emotionally and mentally, in the long run.

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Dear Penny: We Want to Travel Post-COVID, but He’s Too Poor

Dear Penny,

I’m 70 and a widow of six years. I was married for almost 43 years. Two years ago, I met a man from New England on a dating site who’s just a bit older than me. We’re both healthy and physically active. We love to dance, hike and visit new places.

He’s been married twice and has four children. He is very close to his kids, grandkids and siblings. I have met them and they are good, decent people. He has lots of friends and is very outgoing.

He’s self-employed with a business next to his home. He works when he feels like it. He would like to live and work in New England for four months and spend the rest of the time in Florida, where I live.

He doesn’t have much money. His Social Security is minimal. He saves it and lives off of the money he makes from his business and the settlement his ex-wife sends him, which will end in two years. His house is paid off, his expenses are low, and he is careful with his money.

My husband left me financially secure. We were always careful with money and never lived an extravagant lifestyle. I’ve got two adult children who are financially independent.

The man I’m seeing doesn’t have much disposable income and isn’t concerned about it. I’m not sure about a long-term future with him feeling this way. When this pandemic is over, we’d both like to travel and do more, but I don’t want to travel on the cheap. I’m not talking about fine dining and five-star hotels. Just something in-between. I have no problem paying my share, but not for both of us.  

He knows that I will never marry again and whatever money I have left will go to my children. When he is down here, he stays with me (he’s been with me six months, now). He buys half the groceries and many times pays for restaurants, so his monthly expenses may add up to $400. He does help around the house.  

Now that we have our vaccines, I went to visit my family, who live in another country. He decided not to join me, but he didn’t want to return home, either. 

I pointed out that this is his busy time for business and he should take advantage. But he says he has worked hard and it’s his time now to enjoy life.

Is this relationship doomed because of our differences in attitude on finances? Should we just enjoy what we have?

-Am I Too Old to Have It All?

Dear Am I Too Old,

You found a guy who isn’t rich, but does he make your life richer? Your letter screams “yes” to me.

You share the same hobbies. You like his family and friends. It seems like he’s an equal partner with you, even though he can’t pay 50% of the bills.

Your boyfriend sounds like someone who manages what little money he does have wisely.

He can afford his lifestyle — he just can’t afford your lifestyle. My alarm bells would go off if you were telling me that your 30-something boyfriend only works when he feels like it and says now is his time to enjoy life. But from a 70-something? Not so much.

What I want you to do is think about the next trip you want to take post-COVID. Would you have more fun if you took it alone, with the comfort of knowing you didn’t foot the bill for him? Or would you enjoy it more traveling together, even if that means you’ll pay for most of it?

I feel like you’re assigning a level of urgency here that doesn’t really exist. He’s already been staying with you for six months in Florida. He’s not talking about selling his home in New England. No one’s begging for the other person’s hand in marriage. You can plan a vacation, knowing you’ll pay for most of it, without committing your entire retirement to traveling together.

I don’t think your relationship is doomed — and age is a very big factor here. My answer would be very different here if you were in your 20s or 30s. If you were building a home, a nest egg and a family together, your differences on money could be too difficult to reconcile, no matter how in love you were. But in your 70s, it’s a lot more realistic that you can keep your finances separate.

Whatever you do, don’t pursue a future with this man if you think you’re going to change him. It sounds like money just isn’t that important to him. That’s not a character flaw.

You don’t always fall in love with someone in the same tax bracket. That means one person often shoulders a greater share of the expenses. But if this relationship truly makes you happy, that’s a small price to pay.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com