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How Can a Couple Plan When Their Retirement Money Will Only Be There for One of Them?

By Motley Fool Staff – Apr 7, 2018 at 11:58AM

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The wife has a trust big enough for them both to retire. But it reverts to her family, not her husband, at her death.

March 27 brings us the Motley Fool Answers podcast's monthly mailbag show, which Alison Southwick and Robert Brokamp dedicate to providing their best advice and insights in response to listener questions.

Our podcasting duet learned something last month: Having Ross Anderson, certified financial planner from Motley Fool Wealth Management -- a sister company of The Motley Fool -- along for the ride makes it so much easier.

In this segment, they discuss a situation that is in some ways unusual, but is actually a variation on a common theme: Rob's wife recently inherited enough that will allow the two 50-somethings to retire. But the odds favor him outliving her, and when she dies, he loses access to the trust money and will basically be broke. What can he do?

A full transcript follows the video.

This video was recorded on March 27, 2018.

Alison Southwick: The next question comes to us from Rob. "My wife recently inherited a substantial amount of money -- enough that we can retire -- which is great, but I see a potential problem. We are both relatively young. I'm 50 and she's 56. That money is in a trust for her benefit. I can imagine the possibility of living a nice, long life of leisure until something bad happens to her. She unfortunately has a family history of health issues, but all my relatives lived well past 90. When she dies, the trust money we both have been living on goes back to her family and I'll be broke. What do I dooo?"

Robert Brokamp: He had several o's there.

Southwick: He did. I didn't just do that for dramatic effect.

Ross Anderson: This is as classic of a life insurance case as I can imagine. Anytime you're dealing with a situation where one spouse's income or resources are needed to support the other spouse, if a death causes that hardship financially, I think that has to be a life insurance case. You said that you guys are still pretty young, so hopefully health-wise you're still insurable, and healthy, and all of that good stuff.

[In this case], I would get a quote for a permanent life insurance contract, like a guaranteed universal life, or something in that space, so that if the trust money, itself, does divert back to the family, there is something there for you. That means that you're going to have to pay some premiums, but I think it will be well worth it to have that peace of mind.

Brokamp: Another situation where you'd consider this is if one spouse is receiving a pension.

Anderson: Exactly.

Brokamp: And that pension goes away when that person passes away. The other spouse might consider getting a life insurance policy on that person. The other thing I would add is just to make sure that you see a professional and that you really are in good-enough shape to retire.

One thing you're going to have to do if you both leave work is you're going to have to pay for your own health insurance, which can be very expensive. You mentioned that your wife has a family history of health issues. You're not going to be eligible for Medicare until you're 65, so I want you go into it knowing exactly how much you're going to have to pay for health insurance if you decide to retire at such a young age.

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