September 26, 2017

Living Together Over 50: Are You Ignoring The Biggest Financial Risks?

Our Living Together After 50 Infographic shows how couples are putting their own wealth at risk as they age together.
Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

The fastest growing age group for couples opting to live together rather than getting married is those over 50. Since disagreements about money are the number one reason for divorce, we wanted to know if cohabitating couples had discussed day-to-day money issues like how they would share living expenses and more complex situations like who will pay for medical and care expenses if one of them develops health or cognitive issues. 

Our Living Together After 50 infographic provides the eye-opening results of our survey and tells a more complete story of the most critical financial risks many couples who live together are exposed to.

In our Living Together After 50 Financial Quiz, we asked the following six questions:

  1. ‍Do you know how your income from pensions, alimony or Social Security might be impacted if you live together?
  2. Are you in agreement about how you will share your basic living expenses, like mortgage or rent, food and utilities, and discretionary spending, like travel or dining out?
  3. Do you have a plan for care and an agreement of who will pay for it should one of you develop health or cognitive issues?
  4. Have you shared your credit scores with each other?
  5. Have you discussed what happens if one of you loses your job?
  6. Have you agreed on who gets what if you split up?

Of the 223 respondents, 69% were female and 31% were male. Over 75% of respondents were between the ages of 51 and 70. In almost all instances, women answered no more often than men.

Since health care including long-term care costs in retirement could exceed $250,000 per person for someone retiring at age 65 this year, many couples are risking their lifestyle in retirement by ignoring this issue.

If you are cohabitating with and aging alongside your significant other, talk about and create a plan for the unexpected financial issues that could deplete your individual wealth. It’s easier to share potential risks through insurance while you are younger and healthier or protect your personal assets with a “no nup” agreement.

To take our Living Together After 50 Financial Quiz or read more about our solutions to these common risks, we invite you to read: Talk About Finances Before Living Together After 50.

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Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.

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Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.