Personal finance tips for those who find love after the age of 50

Some of the most dramatic shifts in family life are occurring among older Americans. Over the past two decades, divorces have doubled for the baby boomer generation, and the number of people aged 50 and over cohabiting has increased by 85%.

So, when a reader wrote an issue, I knew it was shared by many. After a late divorce, the reader met his current girlfriend. They have been together for eight years. Just before the pandemic began, they bought their dream home for $1.5 million, together as equal owners. But they stretched their finances. They drained their bank accounts because of it, stopped going out like they used to, and are now spending more than half of their total income on mortgage payments for their new home.

He sold both pre-relationship homes and she took some money from her Individual Retirement Accounts (IRAs) so they could afford the house. Finally, I contributed about a third of the capital, which is two thirds.

What is the problem? She has an adult child from a previous marriage who lives in a separate house that she owns entirely. I suspect she’ll tell me she’s “holding” the property until her child inherits it. The reader is 72 years old, and now the worst of the pandemic seems to be over, he wants to travel more and work less, but he feels restricted. They have the enviable problem of being rich at home and cash poor.

I suspect the biggest problem may be perceptions of injustice. He may think that he sacrificed more to buy their dream home and wants her to make more money from her current home. Only a frank conversation about feelings and financial facts will solve their problem. Romance is like a business partnership once you start living together.

The first step in managing finances is managing emotions. Partners should ask themselves — and talk to each other — about what they want out of the relationship and how their pre-relationship commitments will be handled.

Children from previous relationships often present the most difficult problems in such cases. In cohabitation and late-life marriage, the duties of care should be clear. The main question to ask is whether the primary financial responsibility rests with your partner or the adult children.

Creating a will and trust can work the same way as before or after marriage. Remember that relationships with stepchildren take time; The issues associated with the formation of the hierarchical family are so enormous that it may take five to seven years for these families to reach equilibrium. But financial commitments and priorities should be clear from the start.

I’m not a fan of inheritance and I prefer transfers between living things instead: giving while you live. Incorporating children into the monthly budget and savings decisions will make these commitments transparent to all.

Second, as you process your feelings, set a budget. Most of your cash flow will be in a joint account. Separate accounts can keep each partner’s assets and liabilities distinct.

Third, address the risks of long-term care. Less than 4% of people under the age of 80 require physical care for daily living and only 20% of people over the age of 85 require long-term care. Romance in late life presents a tail risk of caring for a partner with a protracted impotence. Insurance is usually the answer to tail risk, but long-term care insurance in the United States is very private and expensive. So people should insure themselves. Each other’s financial and health power of attorney helps protect both partners when one of them becomes incapacitated.

For the reader who emailed me, it makes sense to reconcile their home ownership. The house is now worth twice what they paid for. He put in $500,000 and I put in $250,000. You owe him $125,000. She can sell or borrow from her other property, which has also risen in value. Or they can simply change the ownership structure, so that it owns a larger share of equity. Lawyers can solve this.

In essence, he wants to spend some of those millions on buying a house before he dies. I wish reverse mortgages were decent; Like long-term care insurance, the costs associated with it are very high. Governments should provide not-for-profit insurance for both risks.

In the dream world, everyone in a partnership will have equal income and assets, and there are no pre-romantic obligations. In the real world, a clear system of contributions will lead to feelings of care and fairness. While each partner may have outdated goals, frank discussion about it builds trust. Financial conflicts are usually proxy wars of feelings of care and love.

Teresa Gilarducci is the Schwartz Professor of Economics at The New School for Social Research and co-author of Saving Retirement.

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