The happiest news often leads to lamentation.
Your portfolio appreciates; the taxman cometh. A child is born; he grows to be a poet, i.e. penniless, and you worry so much. People live longer than ever recorded, a fact leading to nightly unrest unbounded, with sleepless minds pondering, will my money hold out? People are living healthier lives in retirement too, but eventually everyone needs care – expensive and prolonged. Where will I find the funds?
Expectations of a longer retirement than previous generations raise a curious set of problems. Prolonged marriages end in late-innings divorce, when at least one of the spouses decides to spend the sunset years poolside, alone. Meanwhile, still-devoted couples must plan for a potentially long life without their partner. We know of cases where one spouse dies at 80, and the other half lives on towards the century mark. That’s a lot of time to take care of yourself, after a lifetime of intimate partnership.
We wonder if couples are ruminating over these issues and having serious discussions with each other, as well as with their financial advisors. TD Ameritrade addressed the matter in a survey, with the results released in February this year. The average life expectancy of Americans now approaches 80 years: how well are people planning for longevity, they wondered?
The survey opens with a positive finding: among respondents aged 40 and older, 87% said they believed they could manage financially if their spouse were to suddenly die or their marriage ended in divorce. Optimism surely counts for something – or does it?
Unfortunately for the Pollyannas, a deeper look reveals trouble: among the respondents, 45% of men and 36% of women admitted they have no financial plan for dealing with either divorce or sudden spousal death. It’s interesting that women are better prepared than men: traditional concerns may still be in place, including the simple truth that women live longer than men. In other words, women have been facing these unpleasant realities for centuries and know the benefits of early thought and preparation.
Romance is not really dead, though: 94% of the over-40 group said they don’t have a prenuptial agreement in place. Most of us marry when we’re young, carefree, carried along by happy emotion and have few assets to lose. If you think wealthy respondents are different, you’re just barely right: 91% of poll respondents with more than $250,000 in assets opted out of signing a prenup package. Rich one, poor one – all are in love with love, it seems.
There’s nothing so remarkable in these numbers: few people enter marriage expecting it to fail (we do know the case of a lawyer who assigned a five-year timeframe to his marriage. Mr. Cold Heart Esq. had a prenup in place before the engagement ring had time to tarnish). We’re not naturally hardnosed, but we are paid to be that way: financial planners need to broach the issue with clients, particularly their high-net-worth customers, and explain the facts dispassionately.
This will lead currently happy couples toward a very delicate talk, indeed. However, we think realism is the foundation of a happy union. Indeed, a prenuptial agreement may even calm an otherwise sound couple in difficult times, as stable arrangements encourage like behavior.
Finally, the poll reveals how reality eclipses hope: 46% of divorced men said the event undermined their retirement plans; 36% of women responded likewise. Financial issues reportedly delayed one-third of unhappy couples from divorcing, a situation that likely did little to increase their reasonableness and openness to compromise.
Forty-two percent of all divorced respondents said they’d sign a prenup agreement if they ever married again, while among those with more than $250,000, this determination rose to 70%. Experience teaches bitter lessons that tend to stick.
For more information, please read:
Many Americans Financially Unprepared for Divorce, Widowhood | ThinkAdvisor