November 25, 2018
Every week, Simply Money’s Nathan Bachrach, Ed Finke and Amy Wagner are answering your financial questions in The Cincinnati Enquirer. If you, a friend, or someone in your family has a money issue or problem, please feel free to send those questions to email@example.com
A.K. in Clermont County: My husband and I don’t have kids, and we don’t plan on having any down the road. Does this make retirement planning easier or harder for us?
Answer: This isn’t a decision between “easier” or “harder,” per se. Instead, you need to understand you have a different set of financial planning priorities (and challenges) to address versus a couple with children.
According to the U.S. Department of Agriculture, it costs about $245,000 to raise one child to the age of 17. That’s a lot of money you and your husband don’t have to spend, right out of the gate. However, the two of you might have other expenses couples with children don’t have, such as more traveling or more charitable contributions. After all, we all spend our money differently.
But don’t let the fact that you don’t have children – and the diapers, braces, and sports camp expenses that come along with being parents – lull you into a false sense of security. Because regardless of how you’re spending your money, the important question you still need to be asking is, “Are we saving enough to retire well?” At Simply Money, we recommend saving 20 percent of your take-home pay.
It’s also critical you have the proper estate planning documents in place. Since you won’t have children to appoint executor of your estate or your powers of attorney for financial and healthcare decisions, take the time to figure out who will fill these roles. Additionally, think about what you’re going to do with any remaining assets once the both of you are gone – will you pass them along to extended family? Friends? Charity? An estate planning attorney can help you work through these looming questions.
It could also make sense, depending on your age, to look into a long-term care insurance policy. A trusted financial advisor, such as a CERTIFIED FINANCIAL PLANNER™ or Chartered Financial Consultant®, can help you determine if that kind of insurance coverage is needed given your particular situation.
Here’s The Simply Money Point: As a couple without kids, you still need to make sure you’re saving enough for the future. And get a game plan in place for when one of you (and, eventually, both of you) aren’t around.
Judy: I have some charities listed as my beneficiaries on my 401(k) and IRAs. Is this a good idea for when I pass away?
Answer: This approach is definitely an easy way to give back to an organization or cause you hold dear – especially if you’re only naming one charity as your beneficiary. If this is the case, it’s pretty straightforward.
However, since you want to bequeath money to multiple charities, it would probably make more sense to set-up a trust. You don’t have to go this route but doing so will make it exponentially easier for your estate executor from an administrative standpoint. Any estate planning attorney can help you with this process.
No matter which strategy you choose, just be sure the charities you select are qualified 501(c)(3)s and they’re willing (and able) to accept your gift. Ask each charity how it would like its name listed as well. Additionally, make sure your executor has clear contact information (mailing address, phone number, email address) for all the charities.
And just a side note: if you happen to have family who might be expecting to receive any of this money, you should have it clearly spelled out that you’re intentionally “disinheriting” them as beneficiaries. Otherwise, they could take their case to the courts to try and get your money.
Here’s The Simply Money Point: You have the right as the account owner to designate anyone – or any organization – the beneficiary of your money. If your goal is to give to multiple charities, taking the extra step to set-up a trust can make for a smoother process once you’re gone.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and Ed Finke and their team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email firstname.lastname@example.org.