Another Retirement Myth Debunked

Michael Lynch   |  Wed Feb 01 14:45:00 EST 2017

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A few weeks ago, I shared a few misconceptions about retirement that I commonly hear, along with some thoughts on how advisors could help keep their clients from falling into those traps. Today I’ve got another retirement myth to crack. How many times have you heard a client say some version of the following: “If my spouse dies, my expenses will be reduced by 50%”?

That kind of thinking is rather shortsighted, in reality. I’ve said it before and I’ll say it again; you only retire once, so we have to plan to set ourselves up for success. That means preparing for both the unexpected and the expected in a smart, careful manner. It’s true that in retirement, one spouse may pass away before the other, but that does not mean that a couple should financially plan for an eventual reduction in living costs by half for one of them.

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It makes sense that with only one person to support, some expenses decrease, such as healthcare, grocery, and travel costs, but many other costs remain intact. For example, mortgage payments and property taxes won’t change, and home maintenance expenses (like snow removal, repairs, or modifications) may even increase. I would estimate that, when one spouse passes, expenses for the surviving spouse may only go down by approximately 20 percent.

The other factor compounding the problem is income reduction. For retired couples who receive a pension and/or Social Security benefits, the monthly payout accounts for both individuals. However, when one half of the couple passes away, then the surviving spouse may begin to receive a significantly lower amount. As such, the widow(er) will have to continue to manage his/her expenses on a lower income.

The moral of the story is, the cost of living after one spouse dies will likely not drop quite as much as many of us expect, and so it’s important for advisors to help their clients prepare for this reality.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable. The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.

 

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Michael Lynch

Michael Lynch  

Vice President, Strategic Markets


Michael Lynch is Vice President of Strategic Markets for Hartford Funds. In his current role, Mike is responsible for engaging and educating both financial advisors and their clients about current and emerging opportunities in the financial-services marketplace. These opportunities range from tactical strategies in areas such as retirement-income planning, investment planning, and charitable planning, to anticipating and preparing for long-term demographic and lifestyle changes.

Mike joined the organization in 1993 as an annuity client service specialist. In 1997, he joined the Advanced Product Marketing department, where he developed an extensive knowledge of estate and retirement planning. In 2004, Mike became a regional sales director. In 2006, he became Vice President and national director of The Hartford’s Retirement and Wealth Consulting Group, which provided thought leadership and financial education focused on retirement and small-business planning. In 2012, he joined The Hartford Mutual Funds.

Mike earned his bachelor’s degree in business administration from Eastern Connecticut State University. Mike is a registered representative of Hartford Funds Distributors. He is FINRA Series 6, 63, and 26 registered and holds a life, health and variable insurance license. He currently lives in Charlotte, North Carolina, with his wife, Kim, and their children, Josh, and Em.


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