midlifedude

Man at midlife making second half matter

Archive for the tag “financial planning”

Divorced Parents with United Financial Goals

One of the toughest things about divorce is untangling and dividing finances, and planning and making financial agreements for the future that each party can live up to when kids are involved. Fortunately, my ex-wife and I have done a pretty good job at that, and it’s paying off now.

Money battles between divorced parents and short-sightedness not only cause intenseCollegeTuition acrimony between the former husband and wife, but almost unavoidably will spill over into relationships between the parents and the kids and cause more turmoil, stress and anxiety. Challenging enough that parents who once combined incomes to create more buying power and economies of scale have to double down on everything after divorce – housing, property taxes, furniture, electricity, cable, maintenance costs, health and car insurance and more – without negatively affecting relationships and kids’ attitudes, perceptions and sense of well-being and security.

My ex-wife and I are likely going through our greatest time of financial stress since our separation 11 years ago right now, yet we are weathering it well (I can’t be positive, but I think I can speak for both of us). This fall 2016, both our children will be in college at the same time. In addition, I am in a graduate school program for counseling, so I’ll be paying for three higher education degrees simultaneously.

But a few things have saved us from potentially extreme financial pressures and enormous debt.

First, we planned for the kids’ college education early in their lives, investing in Maryland’s prepaid college tuition program (for two years’ tuition) when they were 4 and 2. We also opened Education IRAs for each child around the same time. Second, when we divorced, we agreed to continue contributing to each fund on an arranged schedule, and each of us adhered to the agreement. Third, I opened Maryland 529 college investment accounts for me and both kids a few years before my oldest entered college to help fund my education and fill in inevitable gaps in theirs. Finally, each kid made wise choices to attend state universities, where tuition costs are half or less of private or out-of-state colleges.

My ex-wife and I each have had the discipline, cooperation and foresight to keep contributing to the kids’ college educations, even though we were no longer united or in agreement on other things. Sending both kids to college still will make a big dent in my monthly budget and annual cash flow. But as a result of our advanced planning and divorce agreements, I believe each kid will be able to graduate from college debt-free (and me from my graduate program without wiping out savings and investments). That will be a huge gift to each of them, and a big benefit in starting out their adult lives.

Working together with an ex-spouse after a divorce, as aggravating and imperfect as it may be at times, certainly pays off, both for the kids and the adults going their own ways.

Social Insecurity

God help me if, in my supposed “Golden Years,” I’m hanging out by my mailbox, hopefully not hunched over like Quasimodo or leaning on a walker or sitting on a scooter (no offense to those who need them for mobility, I just hope it’s not me), on a certain day of each month anxiously awaiting my Social Security check so I can survive for another month.

Often through no fault of their own – or sometimes, through bad luck, setbacks, unfortunate decisions, costly medical problems, lack of foresight and typical life struggles – that is the fate of many older people in the U.S. The fear that I may join them drives me to try to maximize my income-producing options for the future and save and invest as much as possible, as hard as it is with two college-age children, my own graduate school education, a mortgage, and a life in a metro area with one of the nation’s highest costs of living.

The AARP’s Retirement Confidence Survey revealed that nearly half of 50+ workers and nearly three in five retirees have less than $25,000 in savings and investments. That, to me, certainly seems like a crisis of poverty engulfing our elderly citizens. Think about it: three of five retirees who may live 20 years in retirement may have $1,000 or less in savings and investments for each of those years. That’s a retirement of mere survival.

Most 50+ American retirees have less than $25,000 in savings/investments.

Most 50+ American retirees have less than $25,000 in savings/investments.

The survey found that Social Security is a major source of retirement income for two of three retirees over age 50.

The survey concluded that Americans age 50 and older may not have a realistic view of their financial future in retirement and are not adequately preparing for it.

Whether many people could possibly adequately prepare for it in this age is another matter, with wages and income stagnant in perpetuity; rampant employer layoffs, persistent and widespread unemployment and jobs shipped overseas; escalating and unaffordable college tuition; high student and consumer debt loads; and rising consumer costs and government fees and taxes.

In my state, Maryland, politicians are trying to force workers to save for retirement. A new legislative effort has been launched to establish retirement security plans for more than a million Marylanders who would otherwise rely entirely on Social Security in retirement.

U.S. Labor Secretary Tom Perez joined Maryland leaders to promote the national initiative at the state level: the creation of workplace savings accounts in which employees would be automatically enrolled but would have the right to bow out of participation.

While I believe the financial fate of the nation’s elderly is important to the U.S. economy and society’s overall health and well-being, I contend that the government is overstepping its reach in this effort of forced “workplace savings accounts.” I also believe in individual responsibility and accountability and free choice. And where does this policy leave entrepreneurs, consultants and other non-traditional income earners in this unstable economy which is increasingly moving toward a free-agent model and employers cannot be counted upon for a secure job for life?

As for me, this fear of over-reliance on somewhat meager Social Security payments is one of my motivations for pursuing a graduate degree in mental health counseling. Counseling is something I can do independently to produce income if I so choose, and a career that doesn’t necessarily come with a built-in retirement date. It expands my options, and I want all the options I can generate at my disposal to live life on my own terms in the future.

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