Money Dilemmas

Meg Green: As retirement nears, she’s nervous about investing


Special to The Miami Herald

The dilemma: I’ve always been the money manager in the family. I do the all finances, investments, retirement plans, etc., and have taken good care of us. We’re well off. My wife has taken on the kids and social side of our marriage, and the household. Neither of our kids need anything from us. One married well, one does well.

I’m 76 and retiring soon. We have a financial advisor who has helped me to invest well over the years, and we have our plan for income in retirement all set. We have a 50/50 asset allocation with stocks and bonds all over the world, both in our retirement plans and our joint account. We have no mortgages or debt. Yes, we lost money in 2008, but we made it back. My wife can’t forget how we were scared. She still is, irrationally, I think, and is terrified about retirement income.

She asked our CPA for his opinion and found he has some very strong opposing thoughts. He thinks we should avoid risk and sell all of our stocks when we retire and invest in things that are very safe, such as short term bonds, tips, and cash. He figured that we both could live until over 100 with the money we saved by spending it down over the years. He made a spread sheet showing how long the money would last based on what we spend today. Part of his plan is that we could sell our house one day and live on the proceeds and rent.

Astoundingly, his “plan” makes sense to my wife. She wants security. She wants money in the bank. She doesn’t care about leaving it as much as losing it, and is being stubborn, especially since she has never been involved before in our finances. My financial advisor is shocked at such financial advice. Me too. This is a big problem.

Meg’s solution: This is a serious case of fear overtaking soundness, and unfortunately an accountant who is in the same mode. Enlightenment and reason can be the only antidote, so you’ll need to diffuse this with truths.

I’ll give you a few.

First of all, the greatest investment risk one has is the loss of principal, right? The CPA’s plan is designed to methodically lose principal as you spend it away. That’s the opposite of safe to me! Emotionally, when you see your portfolio being spent down, with no way to replace it, you’ll both be a wreck.

Stock market volatility is only one risk an investor takes, and not a big one if managed properly. Inflation, a bigger risk, can eat away at your purchasing power, which is what your wife needs to worry about. How do you counter the inflation risk in all short term, liquid assets? When rates rise, that’s usually a sign of higher inflation. Equities and real estate are your best traditional inflation hedges. To consider “retiring” your portfolio when you retire goes against the grain. Your savings should be the working partner in your family.

We’re taught, in a perfect world, to live within our means. In retirement, your “means to live within” consists of Social Security, pensions if you have one, and income from your portfolio. A 4 percent return, 5 percent if you’re older, is what one can consider spending in order to keep the portfolio intact or growing along with your needs. Spending down your principal allows for no growth — quite the opposite — and will surely crimp your style down the road.

Although leaving an inheritance should not be the primary goal, it’s been my experience that no matter how well off your kids are, they’ll still want to inherit. Grandkids too. It’s nice to know you can leave them something, and perhaps even splurge on them along the way.

As I see it, if you can redefine risk for your wife, you’ve made a great start.

Take her to some meetings with your financial advisor, and work up a spending plan with her. Budgets are a big part of retirement sanity. Another good idea may be to give her a money market account, in her own name, so she’ll have some available discretionary “stash,” if she already doesn’t have some. By buffering her from retirement anxiety, you’ll have a much better time in your new world.

Got a dilemma? Email askmeg@ meg green .com. Meg Green, CFP, is a wealth manager with offices in Aventura. Her Money Dilemmas column runs monthly in The Miami Herald.

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