A recent Wall Street Journal (April 28, 2018) article addresses two subjects most people are not comfortable talking about: personal finance and death. Mr. Kezak’s piece resonated with me. I have firsthand experience to share. Here is how I planned before a tragedy happens.
Two and half years ago, October 20, 2015, my life turned upside down. Just like that, Dan was gone–he* had little health issues. Both of Dan’s parents lived to their 90s healthy, but he died shockingly of acute, monoblastic leukemia at 74. In a previous blog post (One Year Later), I wrote about my recovery and rebuilding story and began thinking of the daunting dating world for the first time in 40 years. I didn’t discuss my financial situation in that previous post because I already knew how to manage the finances. I could focus on my grief because Dan and I had already prepared this eventuality for years. Below are the five issues the WSJ discussed and my story to address them all and much more:
1. Our beneficiaries were up-to-date
2. We already planned for cremation and the location of our ashes
3. We had excellent Kaiser health care and coverage from my retirement plan from work
4. We did not need life insurance as we had plenty of assets to support the survivor
5. As the survivor confronting shock and grief, I agree with the author 100%.
I kept in contact with friends, family, joined a bereavement group, practiced my Buddhism, hired a life coach and a 1×1 therapist. All were absolutely invaluable as I struggled through the healing process.
In this post, I will be focusing only on the financial issues of loss. Over and again on this blog, Dan and I encouraged everyone to be the masters of their money. When loss hit me, I thought I experienced all there is to know how to manage my finances. Yes, I got through the early crisis because we had that setup (memorial, ashes, transfer of Dan’s IRA to mine etc). But it wasn’t until two years after his death, the unexpected and positive consequence of financial literacy also helped me recover. Knowing investing and personal finance helped me during the most horrific time in my life, my grieving treatments, and later, also in the dating world. I am fortunate to find a loving and compassionate second love of my life–Georgiana.
One Reason Why We Were Prepared: A Cancer Diagnoses at Age 53!
Getting a significant health warning got Dan and me thinking. Eighteen years ago, I had stage-2 colon cancer. Getting the “C” diagnosis is on everybody’s mind, but like most people, we rationalized the threat away by thinking that “it will happen to someone else, not me.” Successful surgery and four years of blood tests to make sure it had not spread made me cancer free. We began preparations for the “what-ifs” with the survivor. It’s not just the fact of preparing for our death, but also what will the survivor do to recover and heal.
We thought it was a great idea to prepare before misfortune hits. Just like preparing for stock market losses by constructing a diversified portfolio balance by a proper mix of stocks versus bonds or preparing for a house fire, earthquake or theft by taking out insurance. Like other calamities in life that beyond our immediate control, (natural disasters, serious illnesses, and debilitating accidents), be prepared.
As we have written all through this blog, Dan and I originated from modest backgrounds. We had no money when we began our 40-year relationship in 1975. Over time we changed into disciplined savers, lived frugally, and learned to self-managed our finances without a financial adviser. We had to learn to invest and trusted no one else to manage our money (My second book, Fighting Powerful Interests, is my story about the horrific Tax-Sheltered Annuities that are sold everywhere in K-12 public education turf). Because the insurance agents in charge of our 403(b) plans had their interests in mind, we could not trust anybody else to manage our money better than ourselves.
When Dan died, I picked up the pieces of my shock and grief-stricken life and moved on. Thank goodness I had no financial crisis to deal with on top of the other shit. I continued to manage our portfolio and the transfer of Dan’s IRA assets to me was straightforward because of our legal marital status and that our beneficiaries were correct and updated. Within a couple of months, I created a trust to take care of the assets on my death.
Many media print articles report that senior couples have not prepared. The reason is obvious. These unfortunates rarely talked about finances and usually left it up to a financial adviser that did not always look after their best interests, or just one person, usually the husband. To be fair, many good-hearted husbands post on bogleheads.org and complain that their spouses refuse to discuss or know about the family’s finances.
WARNING to Any Spouse Who is Not and Never Will Be Interested in Personal Finance!
Much of the time couples have not discussed finances because they didn’t need too. Huge mistake! They had not experienced a cancer diagnosis or been ripped off self-conflicted sales pitches. The last thing you want to have to do is figure out the finances after something terrible and unexpected happens! The most widespread examples are when the husband passes, and he was the only manager of the family’s finances. What will his widow do?
Dan and I met widows at free financial presentation dinners.** Of course, many widows (and some widowers) had little idea what to do:
1. A widow (or widower) first misfortune is not being prepared for widowhood.
2. Their second misfortune is getting eaten by the financial sharks lurking everywhere.
Dan and I learned decades ago that these so-called financial advisers work on commissions and high costs. These heartless “advisers” will salivate at the lucrative commission they will get when a wealthy (and vulnerable) widow gets talked into turning her money into an expensive and ill-advised annuity product with punishing surrender fees and illiquidity.
Do you know what illiquidity means? It means when the surviving widow dies, little will be left to descendants.
THINK ABOUT THIS! Signing the wrong annuity contract can cost you and the family big time. I am not the only one preaching this. No genuine fiduciary fee-only financial adviser would ever recommend a complex and self-serving (commissions to the salesperson) product that few people understand–an annuity.
Suddenly losing a spouse is horrific. I KNOW!
But you do not also have to endure a financial tragedy. Prevention is straightforward. You must get involved with your spouse, so both of you know what you want to do in case you are the survivor like I am. If you are prepared and your spouse refuses to heed your wishes, I feel bad for you.
I am not a marriage counselor, but this is a serious marital and family matter. Make sure your reluctant spouse knows the negative outcomes of financial ignorance. Not knowing the basics of your family’s nest egg if you die is serious business. Your spouse could be literary left to the wolves. Your nest egg, which it took a lifetime to save, could go to an insurance company when the surviving spouse dies (That’s how many guaranteed lifetime payment systems work with insurance companies). It is very easy for a smooth-talking salesperson to sell a costly and illiquid contract or retirement plan to a vulnerable and financially illiterate surviving spouse. The combination of financial illiteracy, wealth and vulnerability are deadly.
You might sit down and calmly talk about the inevitable and invite your spouse to the appointment with a financial professional that you have already set up.*** Get specific, tell your spouse the date and time of this appointment and that you are going with or without them–“It’s vital that you know the family’s finances because I am not going to live forever. I want you to be prepared sweetheart!”
It was truly a lifesaver to know how to manage my money and my life without Dan, as he was thoroughly ready to manage without me. You will have a lot to deal with when a spouse dies. But the last thing you want to do is have to make major financial decisions when you are in the middle of grief. Selling your house because you don’t know where your late spouse invested the money happens more often than you think!
BE PREPARED!
It will save you and the surviving spouse a lot of headaches. Your family’s lifelong nest egg will not be subjected to possible retirement plans that only look out for the insurance agent’s bank account (Hideous costly commissions, annual expense ratios, trading costs, etc.).
* Dan Robertson, co-author of Late Bloomer Millionaires, Steve’s partner and husband of 40 years died October 20, 2015, from a sudden onslaught of leukemia.
**Dan and I went to these sale-pitch dinners for the free meal from quality restaurants! We never bought any of the financial products offered. All were either annuities or broker/dealer actively-managed and expensive mutual funds usually from the large financial firms of which we avoid like the plague. But the dinners offered free were awesome! :- ) TIAA and Vanguard don’t engage in these types of sale pitch practices because to do so they would have to increase their investment costs.
***You can find a fee-only fiduciary financial adviser in your area by visiting National Association of Personal Financial Advisers or the Garrett Planning Network websites and type in your zip code. If an adviser found on these websites refuses payment by the hour only, report them to the organization. It’s your money. Even some of the advisers from these organizations might charge too much. So, be vigilant about advisement costs, especially the less transparent Assets Under Management (AUM). How much is too much? FYI, AUM cost over .50% on assets is too high, in my opinion (For example, $100,000 x .005 = $500 per year cost of the adviser managing your portfolio).
Many articles about the financial issues of widows and widowers have been published over and over again. Most recommend the same idea that I have recommended, become financial literate and save yourself and your nest egg a lot of heartache and asset losses.
More articles. There is a ton of information to get you prepared.
“Suddenly Single” for adults of all ages: https://www.thrivent.com/magazine/2018/march/files/suddenly-single.pdf
Big Money Mistakes that Widows Make and How to Avoid Them! Below are suggestions to help widows avoid mistakes, especially in early … advice would you give other new widows about avoiding big financial mistakes?
What Widows Should Know About Financial Advisors | Mutual Funds … Mar 20, 2014 – Before the global financial crisis of 2008, women tended to ride their husbands’ … The advisors who retain widows are those who have considered both … Experts agree that couples intuitively avoid wading into the topic of …
‘Widowed People Are Invisible in This Society’ – The Atlantic Apr 29, 2016 – Patricia adds, “I didn’t fully realize that widows were a target [for greedy men], since people think you ….. Selling Sex to Avoid a Financial Crisis.
Steve’s Bio
Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the United Teacher-Los Angeles (UTLA) newspaper for 13 years. Thrice featured retirement plan advocate in the Los Angeles Times and U.S. News and World Report. He co-founded an investor self-help group 403bAware for teacher colleagues and wrote 7,500 posts in three investment forums since 1997. Frequently quoted by the media, testified at California State legislative hearings and honored with the “Unsung Hero” award by UTLA for his retirement planning advocacy.
For the last nine years, he serves on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee contains collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457b/403b, of 55,000 former and current LAUSD employees, worth $2.5 billion in total assets.