Questions answered: What would change if one spouse predeceased the other? How would your income and portfolio be affected? What are the considerations when planning around one spouse predeceasing the other?
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Key Takeaways:
- Understanding the math around sustainable withdrawal rates.
- The 4% Rule:
- The amount that you can withdraw if you’re assuming your portfolio needs to last for 30 years.
- The Guardrails Rules:
- With longer life expectancies and earlier retirements, how can you stretch the 30-year period into a 40-year period?
- The 4% Rule:
- Considerations for a good financial plan, regardless of the spousal age gap.
- There is always a risk that one spouse predeceases the other.
- Tax brackets will become condensed.
- Your deductions will be cut in half.
- Your income and portfolio could change.
- There is always a risk that one spouse predeceases the other.
- Will the surviving spouse be okay?
- This would depend on their expenses.
- The portfolio will continue to generate income per month.
- The surviving spouse would lose their spouse’s social security benefit but collect a survivor benefit.
- This would depend on their expenses.
- What would change if one spouse predeceased another?
- Understand what your budget would look like.
- Consider major changes to expenses such as travel, housing, insurance, food, taxes, etc.
- Look at your portfolio.
- It probably won’t change that much.
- Things that change the portfolio:
- A life insurance policy.
- Acute care in a long-term care facility.
- A trust account.
- Moving to a new home.
- Understand what your budget would look like.
- What would affect your non-portfolio income?
- If both spouses collected social security benefits, the surviving spouse collects the higher of the two benefits.
- Pension survivor benefits, if there are any.
- The riskiest time is today.
- If one spouse predeceases the other today, the surviving spouse needs to live off of a limited income for a longer time.
- What is the most your portfolio could generate under the worst-case scenario?
- Add the income sources that the surviving spouse could have.
- If the income sources plus the portfolio do not cover the surviving spouse’s expenses, you’ll need to do some planning.
- Could you sell a home and downsize?
- Check episode 91 on varying withdrawal needs in retirement.
- How would life insurance change your projections?
- If the income sources plus the portfolio do not cover the surviving spouse’s expenses, you’ll need to do some planning.
- Add the income sources that the surviving spouse could have.
- Financial planning software makes it all much easier.
Episode Timeline:
[01:00] Listener question.
[03:30] Understand the math around sustainable withdrawal rates.
[13:56] What would change if one spouse predeceased the other?
[18:56] What would happen to your non-portfolio income?
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