Author Topic: How best to invest when there is a significant age difference with spouse  (Read 3893 times)

lfritch1616

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Hello All,

I'm a newcomer to MMM.  As many have already stated, I wish I had found this site sooner.  I'm looking to completely revamp the way my husband and I spend and save our dollars.  The question I have is what's the best way to invest when there is 14 year difference our age?  I'm currently 30 and he 44.  Since reading this site, I've decided to put us on an 11 year path to FI (could probably get there sooner, but want to be a little conservative with two small kids in our house).  We both max out our 401K contributions, but I've been reconsidering this because I won't have access to my dollars anytime soon.  He has 125k in his 401 and 13K in a RothIRA.  He could access his all of his dollars at 55 if he retires from his current employer (which is very likely).  So I am concerned about how much we'll have available to us when he's 55.  I'd like to stash a lot more away in taxable investments (only have 40K currently).  Should I contribute to my 401K just to get the company match (4%)?  And then invest the rest with Vanguard?  I currently have 77K in my 401 and 23K in my t-IRA, so even if I don't invest anything more (and it averages 6%), I will have over 500K ready and waiting when I turn 59.5.

Many thanks in advance for advice!

GGNoob

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Re: How best to invest when there is a significant age difference with spouse
« Reply #1 on: November 17, 2014, 10:26:58 AM »
Max out retirement accounts before contributing to your taxable accounts.

My opinion would be that if your husband plans to retire before you, you should both invest based on when you plan to retire. When you are both working, try to save as much as possible to tax-advantaged retirement accounts. Then once your husband retires, try to live off of your income, even if that means you have to stop contributing to retirement accounts. So if your husband retired at 55 and you were going to work 14 more years, if nothing else, you'd have 14 more years for your investments to grow, even though you may no longer be contributing to them. So if you then retired at 55, you could start withdrawing from your husbands accounts first since he would be 69.

lfritch1616

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Re: How best to invest when there is a significant age difference with spouse
« Reply #2 on: November 17, 2014, 10:43:51 AM »
My goal is to retire when my husband does.  I'd like to save enough so that we can live off his retirement and our investment funds.  My 401k funds would just be a bonus once the time comes.  I'm not opposed to contributing to my tax-deferred accounts, I just worry that we won't have enough to be FI if I don't put more into investments now.

MissPeach

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Re: How best to invest when there is a significant age difference with spouse
« Reply #3 on: November 17, 2014, 02:26:27 PM »
My advice is to take advantage of tax advantaged accounts too to take advantage of the tax breaks. When your income drops, you can try to do something like a roth conversion ladder to get access to that money.

GGNoob

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Re: How best to invest when there is a significant age difference with spouse
« Reply #4 on: November 17, 2014, 02:37:27 PM »
My goal is to retire when my husband does.  I'd like to save enough so that we can live off his retirement and our investment funds.  My 401k funds would just be a bonus once the time comes.  I'm not opposed to contributing to my tax-deferred accounts, I just worry that we won't have enough to be FI if I don't put more into investments now.

Then you may want to aim to have 5 years of expenses between a taxable account and Roth IRA contributions. Roth IRA contributions (NOT earnings) can be withdrawn at any time, penalty free. The rest of the money can be in your tax-advantaged retirement accounts and you could start a Roth IRA ladder to get access to those funds early. But because it takes 5 years to get access to this money, that's why you need 5 years of expenses saved up. As a last resort, you could always pay the 10% penalty to access your funds early.

seattlecyclone

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Re: How best to invest when there is a significant age difference with spouse
« Reply #5 on: November 17, 2014, 02:51:54 PM »
I agree with the others who say to max out the retirement accounts before worrying about taxable investing. Because your husband will be closer to traditional retirement age when you retire, max out his retirement accounts before your own if you can't afford to do both.

If he stays with his current company until 55, he'll have unfettered access to the 401(k) funds at that time. That account already has enough to pay for five years of MMM's family's expenses, and will have significantly more in it if you continue to max it out for the next ten years.

Use the husband's 401(k) and your taxable funds for the first five years of retirement. After that you can add in withdrawals from the husband's Roth IRA since he will be 60 at that time.

While this is going on, gradually convert your own 401(k) and TIRA to Roth. You pay tax at the time of the conversion (which is why it's important to convert a little bit each year rather than the whole amount all at once), and you can withdraw the amount converted five years afterward with no penalty.

If you do this, you will reap the benefits of tax deferral during your higher-earning years, and you should have no problem having access to enough money until you're both old enough to access your retirement accounts without penalty.

Zaga

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Re: How best to invest when there is a significant age difference with spouse
« Reply #6 on: November 17, 2014, 02:59:56 PM »
This is my response to someone else about the same question that I made a few weeks ago:

I'm in your boat as well with a 12 year age difference.  Because of this plus income difference (he's been able to put more into his 401-K because he earns more and my job had a limit on what I could put in) there's about twice as much in his accounts than in mine.
 
But I'm not worried about it.  Using the 4% rule as a general guideline when we retire, as long as we are looking at the entire portfolio when calculating how much is safe to withdraw in any one year I think it's fine to then take that money out of just one person's account.
 
For example, say things go on for us as they are and it continues that about 30% of the retirement savings is in my name.  At retirement we could potentially have about $1 million total.  Using 4% as a withdrawal amount, that's $40,000 the first year.  That money can easily all come from accounts in his name, after all, he will have $700,000 in his name while I'll have $300,000 in mine.
 
Does that make sense?  It doesn't matter how much is withdrawn from which account at this point, so long as the portfolio as a whole is taken into consideration.

lfritch1616

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Re: How best to invest when there is a significant age difference with spouse
« Reply #7 on: November 17, 2014, 06:23:39 PM »
Thanks everyone for the advice!  Looks like I need to read up on the Roth IRA conversion ladder process.  I'll likely keep maxing out the tax deferred accounts.  We're also toning down our spending lifestyle, so I hope to have more to put into taxable investments while maxing the retirement accounts - Best of both worlds!

ToughMother

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Re: How best to invest when there is a significant age difference with spouse
« Reply #8 on: November 17, 2014, 06:57:59 PM »
Just want to echo the THANKS for the thoughts as my partner and I are in the same situation.  We've been going by the "value of the whole portfolio" notion, so I'm glad to hear that confirmed.  I've had more retirement savings opportunities than my partner (lousy benefits or none) but now she has an employer match as well as tax advantaged savings that we'll be maximizing in the next year.  Our goal is about 6 more years of FT work and then both of us can drop to PT/per diem/consulting work, markets willing!

dragoncar

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Re: How best to invest when there is a significant age difference with spouse
« Reply #9 on: November 17, 2014, 07:01:19 PM »
Put your entire salary into the most expensive life insurance policy you can get on him.  Keep him happy with daily bacon breakfasts and martini smoke breaks.

Or what they said above

lfritch1616

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Re: How best to invest when there is a significant age difference with spouse
« Reply #10 on: November 18, 2014, 07:18:05 AM »
Put your entire salary into the most expensive life insurance policy you can get on him.  Keep him happy with daily bacon breakfasts and martini smoke breaks.

Or what they said above

BAHAHAHA!  Now there is a rock solid plan :)