Not So Simple

Jeffrey K. Actor

MY WIFE AND I HAVE divided household duties over our 36 years of marriage. I’m responsible for the upkeep of anything mechanical. Lori has the last word on almost everything else. In essence, my wife presides over functions that make the household a “home,” while I take credit and blame for keeping the nuts and bolts operational.

I also hold primary responsibility for trafficking the family’s money. I pay bills, ensure accounts are reconciled, assemble and submit tax information, and monitor financial accounts. Whereas Lori gets to spend current dollars, I’m responsible for tracking past, present and future expenditures.

This isn’t as draconian a split as you might think. We’re on the same wavelength when it comes to saving and spending. Our overall money philosophy is surprisingly similar, which likely contributes to our marriage’s longevity. We share major financial decisions and I readily bounce ideas off her prior to key investment moves.

We discuss things like rebalancing, IRA contributions, and bond and certificate of deposit (CD) purchases and sales. We also discuss strategies to meet our goals, including the best time to claim Social Security. Granted, these are short discussions, yet they keep us moving together toward our financial targets.

A medical emergency last year demanded that Lori take over financial activities during my extended recovery period. We had a few weeks’ notice to prepare, allowing us to review our accounts and cash flow. During this time, we went over monthly and semi-annual bill payments. I made sure Lori was able to access files containing passwords and electronic links. We also examined various financial spreadsheets I’d created.

Together, she relearned how to move money between accounts to keep the household running. I admit it was slow and painful to watch, mostly because it had become second nature for me. Having her perform these tasks was reassuring for both of us. We felt confident she could cope until I was back on my feet.

But there was one major hurdle that my wife had trouble overcoming. It wasn’t obvious to her which funds she should tap for monthly transfers to the bank account we use for paying bills.

I thought I’d simplified our cash flow system as we got closer to retirement. Indeed, I consolidated most of our retirement accounts at a single financial firm, automated payments for major utilities and health care expenses, and ensured that expenditures flowed through a single bank account.

I also created a multi-year cash buffer to minimize sequence-of-return risk once our retirement withdrawals began. This allows me to sleep easier at night, no matter how my Vanguard Total Stock Market Index Fund (symbol: VTSAX) and Vanguard U.S. Growth Fund (VWUAX) are faring.

But the monthly transfers to our bill-paying account were one thing that wasn’t automated. Rather, I simply pulled from different accounts as we needed cash. The sum transferred each month was dictated by a complex mental juggling act depending on which asset class had done well over the prior few weeks.

In addition, I introduced further complexity by adding some new cash buckets: a high-yield savings account and laddered CDs at Ally Bank, Series I savings bonds at TreasuryDirect, and Vanguard Federal Money Market Fund (VMFXX) in a regular taxable account. I also added the Vanguard money market fund to my IRA, so it could receive the income distributions from my Vanguard Total Bond Market Index Fund (VBTLX).

It finally dawned on me that these changes might have reduced risk, but they hadn’t reduced complexity. In fact, figuring out how much to withdraw and from which account is no simple task.

I clearly need to create a detailed step-by-step description of the mechanics involved. This feels like a Herculean task. I’ve decided the first step is to be humble, and ask for help. What would readers recommend as a good, simple strategy for pulling money from long-term investments to pay for upcoming expenses?

Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. Check out his earlier articles.

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