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'Artificially subsidized'

As empty-nesters in their mid-50s, Brad and Angie are looking forward to retiring within a few years. Their dream is to buy an RV and travel across the country. Unfortunately, their savings and investments don’t allow for this.

Despite their relatively high income, the couple has assets worth $494,589, savings of just $2,975 — and a whopping debt of $433,105.

According to a July 2023 report from the Government Accountability Office (GAO), 90% of high-income seniors have some sort of retirement balance, but the median for these households was only $605,000. Given the current cost of living, that’s not enough to retire in most U.S. states.

Sethi believes part of the reason Brad and Angie are falling behind is because “only one person is rowing the canoe.” Brad has delegated all of the family’s financial planning to Angie because she has a business degree and is good with spreadsheets. “She’s the whiz kid,” he said. “I took the easier route and let her handle everything.”

As it turns out, 59% of women surveyed by HerMoney and the Alliance for Lifetime Income were primarily responsible for their family’s finances.

Of those surveyed, 48% were responsible for managing retirement plans for themselves and their partners.

However, by staying out of the loop, Brad is often caught off guard when an account is empty or a credit card balance is depleted. In a previous episode, Sethi described how a person can feel “artificially subsidized” when all the money-related responsibility falls on the partner.

Meanwhile, Angie’s spending habits are only further delaying the couple’s retirement targets.

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Justifying spending

Angie’s humble background and upbringing have convinced her she “deserves” to spend her family’s high income. She admitted her budget for the family doesn’t leave much of a cash buffer for emergencies, which is why the couple often struggles with cash flow issues. She also admitted she’s guilty of overspending on the house and other indulgences.

“I definitely feel like I deserve [to spend] because now I make a good living and I want my children to have things,” she said. However, Sethi called her out for using her kids as an excuse to overspend, calling it the “ultimate justification.”

A habit of rationalizing spending habits can deteriorate personal finances over time. “You can actually go years without admitting how bad things are,” Sethi stated.

To salvage the situation, he recommended Brad take his share of the responsibility for the family’s finances while Angie cuts back on several indulgences so that they can start saving to afford the retirement they desire together.

In a follow-up session, Angie claimed to have reduced the family’s fixed costs from 70% of income down to 59%, while Brad said he’s trying “not to put my head in the sand.”

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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