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What you can do if you find yourself suddenly retired

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The pandemic seems to be driving a surge of early retirements as businesses close or downsize and older people weigh the health risks of continuing to work.

The share of unemployed people not looking for work who called themselves “retired” increased to 60% in April from 53% in January, according to a study by three economists. The study was done in the early days of the pandemic, well before tens of thousands of businesses nationwide closed permanently and others began offering early retirement packages to trim their workforces.

“It seems to be a persistent and quite widespread phenomenon,” says study co-author Michael Weber, an economics professor at the University of Chicago.

See: Are employers using the pandemic as cover to shed older workers?

Unfortunately, many people haven’t saved nearly enough to avoid a steep drop in their standard of living when they retire early, financial planners say. Even those with substantial retirement accounts could make hasty decisions that cause them to run short of money.

Create your retirement budget

Tally your expenses and identify any you can trim. Include irregular expenses, such as home repairs or a car replacement, that you’re likely to face in coming years.

Your “must-have” expenses should include health insurance, says Catherine Valega, a certified financial planner in Waltham, Massachusetts. People typically must be 65 to be eligible for Medicare. Until then, prepare to pay for coverage because going without is especially dangerous during a pandemic.

If you had health insurance through your employer, you usually can extend that for up to 18 months, thanks to COBRA, the Consolidated Omnibus Budget Reconciliation Act. But you’ll have to pay the entire premium plus a 2% administrative fee. Last year, the average annual cost of health insurance was $7,188 for a single person and $20,576 for a family, according to the Kaiser Family Foundation, which tracks health insurance trends.

If your spouse has group health insurance and can add you as a dependent, that’s often the most cost-effective way to go. If not, you may find a better deal through HealthCare.gov, since most people will qualify for tax subsidies that reduce premium costs.

Evaluate all income sources

You may face decisions about what to do with workplace retirement accounts, such as whether to roll a 401(k) account into an IRA or how to take a pension. You may have to evaluate a buyout offer or figure out what to do with stock options.

These are complex decisions with huge consequences, so consider talking to a fee-only financial planner. Many financial planning organizations, including the National Association of Personal Financial Advisors, the Association for Financial Counseling & Planning Education and the XY Planning Network offer free counseling sessions for those whose incomes have been affected by the pandemic.

Taking big withdrawals from your retirement funds early in retirement can dramatically increase the odds you’ll run out of money. A 4% withdrawal rate — where you take 4% of your retirement account balance the first year and adjust that payout for inflation each year afterward — has historically allowed savings to last for a 30-year retirement. Some financial planners recommend a more conservative start of 3.5% or 3%, or starting at 4% and cutting back during bad markets.

Working at least part time can reduce the drain on your savings and may give you access to valuable benefits, including health insurance and retirement accounts. And staying connected to the workforce can increase your odds of finding a new full-time job if that’s your goal.

Make informed Social Security choices

Social Security may be your largest source of income during retirement, and research shows most people would be better off delaying their applications to maximize their checks. That’s not always possible, of course, but often financial planners recommend tapping other retirement funds first if that allows people to delay drawing on Social Security.

If you’re married, it’s important to consider how your decisions affect your spouse, says CFP Brian Ellenbecker of Milwaukee. The higher earner’s check determines how much the survivor receives after the first spouse dies, for example. AARP has a free Social Security claiming calculator, and more sophisticated versions are available for a fee from Maximize My Social Security and Social Security Solutions.

Consider downsizing — perhaps radically

If you can’t cover expenses with your income, you may have other alternatives. If you own a home, have substantial equity (at least 50%) and are at least 62, a reverse mortgage can help you turn your home’s value into a guaranteed monthly check. Or you may decide to sell your home and find somewhere cheaper to live.

See: Where should I retire?

Linda Rogers, a CFP from San Diego, says several of her clients discovered they can live well on less money by moving abroad for a few years. Portugal is a particularly popular destination, Rogers says.

Obviously, an overseas move isn’t for everyone, particularly in a pandemic when many countries are restricting travel. But for some adventurous types, it could be at least a partial solution.

“They’re loving it so far,” Rogers says.

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My parents made my sister executor of their $4 million estate, and joint owner of their bank accounts. Should I be worried?

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Dear Quentin,

I just found out that my parents (who are in their mid 80s) have named my sister as their successor trustee, and executor of their estate and wills. They have also put her name on all their financial accounts “in case something happens to us.”

I have no reason to suspect my sister of any nefarious motives, but having her name as joint owner on their accounts seems potentially problematic to me in case of their passing. What are the pros and cons of this arrangement?

Their estate is probably worth about $4 million. We have five other siblings who are currently unaware of this arrangement. Can you provide any resources or articles I could show my parents regarding better ways to accomplish their goal of having someone in charge of their finances?

Concerned Son

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Son,

People often don’t do anything nefarious, until they have the opportunity to do so and/or run into financial difficulty of their own. That may not be the case with your sister, of course, but your parents should absolutely know the meaning of making one of their children a co-owner on their bank accounts, if their intention is to merely have your sister assist with bills.

Is she a co-owner of this account, or is she a co-signer? If it’s the former, your sister is a joint owner and can spend the money as she wishes. She would likely be liable for debts on that account after your parents’ death. If it’s the latter, your sister has the right to sign checks on your parents’ behalf. To complicate matters, not all banks have the same definitions for “co-owner” and “co-signer.”

Many people don’t understand the difference between being a co-signer and a co-owner. There are many cases of children listed as co-owners (rather than authorized signers) on those accounts who have emptied their parents’ bank account before and after they died. Sometimes, they did not keep enough (or any) receipts, and have been wrongly accused of emptying a parent’s account.


Many people don’t understand the difference between being a co-signer and a co-owner.

In the letters I have received on this issue,the damage was often already done, typically caused by a combination of the three “Gs” — grief, gripes and greed — when long-simmering sibling rivalries boil over. People do things that they may not otherwise do if their parents were there to witness it. You are correct to ensure your parents’ action is in accordance with their wishes.

There are other ”what ifs”: What if your sister dies first? The account would likely become part of her estate too, with a share to be distributed to her children, which could then involve paying a state inheritance tax. Your parents’ accounts could also be “paid on death” or “transferred on death,” avoiding the public and often time-consuming probate process. Read more here.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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S.E.C. Commissioner Hester Peirce on the outlook for crypto regulation, and whether this will finally be the year we see a Bitcoin ETF.





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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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