I kept my finances totally separate in my first marriage of 20-plus years — and I’m going to do it differently this time.
When we are married and combine our finances, we will have about $500,000 in a 403(b). We have no credit-card debt or student loans, but I do have a car note of $17,000 at 7% interest. I currently have one child in college (paid for by a 529 plan, but what’s left in there probably won’t get her all the way to graduation).
My partner and I are both 50 years old, and can both retire from state jobs with a pension in a few years (but we will most likely keep working after that time). I’m selling my house, getting married and moving in with my partner. I will make a $150,000 profit on the sale. What is the best thing to do with the money?
Getting Married
Dear Getting Married,
You may have inadvertently answered your own question.
If you intend on commingling your finances, it looks like that $150,000 profit on the sale of your house will get rolled into the rest of your marital property. But I advise you to hold onto your separate assets because — although it may seem unthinkable now — if you do split up at any point in the future, you will have maintained some semblance of financial independence. That way, you can walk away. One of the most common reasons people stay in marriages that make them unhappy is, aside from having kids together, finances.
If you buy a property together and you have a pot of money to spend, please contribute 50% of that price. It’s good practice to start off on an equal playing field. If, over time, you or your future spouse feel more comfortable about using your own money to make renovations to the property, you can have that conversation if/when the situation arises. Second marriages, statistically, have less chance of succeeding than first marriages. That’s a statistic, not a judgment call. It’s a reminder, a logical one, to not mix finance and romance. At least, not yet.
Do not commingle that money. Pay off your car loan; you are losing money as the interest on the loan is more than double the current rate of inflation.
So what do you do with the $150,000? Do not commingle that money. Pay off your car loan; you are losing money as the interest on the loan is more than double the current rate of inflation. Secondly, after dividing your household expenses 50/50 with your future spouse, put any extra cash aside for your child’s education, if you can afford it given all your other bills, and/or set up an emergency fund of at least six months’ expenses. It’s also a good time to set up powers of attorney for financial and medical reasons, and make a will. Add a prenuptial agreement for good luck.
Applying the 4% rule — whereby retirees would in theory withdraw no more than 4% of their retirement assets, adjusting every year thereafter for inflation, for the next 30 years — you will get a better idea of your withdrawal rates at 65 or beyond (assuming your respective accounts continue to grow). You say you have $500,000 collectively in your 403(b) tax-advantaged retirement plans, so continue working. Even accounting for Social Security, you have a way to go to build up your retirement savings. But you’re definitely on the right path.
Hopefully, when you pool your resources for a property, you will have minimal monthly expenses, save for upkeep and property taxes. You save money being in a couple. “The average single person spends about $48,000 annually, of which $17,899 is spent on housing,” Bankrate says. “In comparison, the average married couple spends about $76,000 annually, of which $24,811 is spent on housing — $12,405.50 each. So married people living together are spending nearly $5,500 less on housing expenses each year than single people are.”
Sorry for answering questions you did not ask.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot respond to letters individually.
More columns from Quentin Fottrell:
Check out The Moneyist’s private Facebook group, where members help answer life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
This post was originally published on Market Watch
