Q: I'm in my early 30s and have been living with my 45-year-old boyfriend for almost a decade. We own a house and have joint and individual checking accounts, Roth IRAs, a will, and power of attorney documents—everything you recommend. My concern is that my boyfriend isn't saving enough for retirement. At my urging, he started a Roth IRA but has invested less than $5,000 in it. He is anticipating a $150,000 inheritance from a relative to see him through retirement, which I don't think will be enough. I'm worried that I'll end up supporting us both.
A: Your boyfriend is being irresponsible. Anticipating an inheritance and receiving one are two different matters. Given that so many of us are living longer, combined with an increased need for care as we get older, the reality is that the money family members intend to bequeath can end up going toward their own living costs. If your boyfriend does eventually receive the inheritance, it could come when he's well into his 60s—is he prepared to wait that long? Even then, $150,000 isn't a windfall he can rely on to cover all of his retirement costs. To live off of the money, he will want to invest it conservatively in bonds to generate income and avoid eating away at the principal. I'm going to be generous and assume he'll earn 5 percent interest annually in a municipal bond (which is exempt from federal and often state income tax). At that rate, his $150,000 would generate about $625 a month. I bet that's not enough to pay for his living costs as well as all the expenses that come with enjoying one's later years (travel, going out more often, etc.).
Your partner needs to grow up rather than hope his rich relatives and conscientious girlfriend will bail him out. I get the sense that the good financial choices you've made together are the result of your planning and initiative, not his. It's okay for one person to be the leader, but both of you have to take responsibility. If he isn't up for that, you need to rethink the relationship—and all the money you put into it.
When he's ready to get serious about saving, I want your boyfriend to turbocharge his Roth IRA. The annual maximum contribution is $5,000 if you are under 50 years old and earn less than $101,000 ($159,000 for married couples); it's $6,000 a year if you're 50 or older. And tell him I said he'd better be taking advantage of any retirement accounts offered through his job, such as a 401(k). Many employers will match your contribution if you agree to have money deducted from your paycheck and invested in the account. That match is like a bonus; don't turn it down. Because your partner is getting a late start, he should put money in a regular taxable investment account and choose low-cost index funds or exchange-traded funds. As I explain in Fee Savers, today's tough economic climate makes it more important than ever to minimize the fees you pay on your financial accounts.