“My partner also wants to travel and do similar things, but he is concerned about having the resources to do them to the extent that I would like to.” (Photo subjects are models.) – Getty Images
I am a 65-year-old gay man and my partner is 73. I am fortunate to have met someone late in life, and I am trying to navigate this newish relationship given our two sets of friends, our two homes and our individual histories. While we consider ourselves to be partners, we have only been together for about two and a half years.
We love one another and get along well, but I am concerned about how our relationship could evolve given the difference in our ages. He will slow down before I do. We live in San Diego and are both retired and reasonably healthy. Neither of us has children. I am healthy and previously thought I could live into my 90s. However, my siblings passed away from illness.
My partner also wants to travel and do similar things, but he is concerned about having the resources to do them to the extent that I would like to. His financial circumstances present certain limitations for me. I also am concerned for him should he spend more money, but then something happens to our relationship. Having said that, I think we will always be friends.
I have been fortunate to accumulate sizable assets, more than I ever thought possible. I worked hard, saved, invested and lived within my means. My sound decisions balanced out the poor ones, although luck and market trends also contributed to my success. I live in a triplex, which I own free and clear.
My net worth is $7.3 million: $1.4 million in an IRA, $800,000 in a Roth IRA, $1.4 million in a taxable account, $1 million taxable managed bond fund and $2.7 million in real estate. I have more equities and less fixed-income investments than is usual for someone my age. I recently have been reducing risk with more fixed income.
I live in one unit and rent out the other. My income is around $150,000 a year between rental income, Social Security and interest from investments. This year, I started to collect Social Security ($43,000 a year net after my medical-insurance deduction) and I chose to withdraw $45,000 in interest from my bonds and investments.
My partner and I have discussed ways he might generate extra income to support higher spending. His net assets are $2.4 million, consisting of a $2.2 million primary house with an in-law apartment; it has a mortgage of $300,000. He has $20,000 in cash, $100,000 in a Roth IRA and another rental property. He has another taxable account of around $100,000.
His rental could generate $300,000 after taxes. He receives about $2,600 a month in Social Security and $4,000 in rent from the in-law apartment. He covers his expenses with that income, plus the rent on the out-of-state rental property. He lives comfortably but cannot match my spending. He has limited liquidity, as most of his wealth is in his primary home.
I grapple with uncertainty over the short time we have had and may have together, and with a desire to have a financial plan and do things now. While I don’t mind spending more on our activities, I also realize he has ample net worth and could spend more himself. Maybe I overthink things.
We are trying to figure out a way for him to tap into the considerable equity in his house. I could inherit some of his assets if I paid a disproportionate share of the expenses now. But what if we separate? I need to protect myself. Part of freeing up more cash would involve selling his rental property. Maybe I should deal with the financial concerns after that money runs out?
The first option to raise more money would be for him to sell me a share in his house. I live in an area where most of my friends are nearby, and so does he. Buying a share in his house could be complicated by having to agree on a selling price, dealing with the in-law rental income, our living apart, our relationship, and what our other beneficiaries will inherit.
I would need to sell some assets to raise the capital to do this. I suppose he could carry back a loan as part of the deal structure, and I could also assume the existing mortgage. Jointly owning a house signals greater commitment, but getting involved financially concerns me. My finances currently are fairly straightforward and liquid, except for my duplex.
Another option would be for me to give him a reverse mortgage or a home-equity line of credit. That would be easier for him, but more complicated and messy for me. Both loan types could be payable if he sold the house, and if he died I would get paid out from the settlement of his estate. I likely could afford to give him a HELOC, although that would tie up some of my money.
Of the two options, buying a share in the house might be better than giving him a reverse mortgage. Both involve me tying up money for a long period, though, as I will not force a sale. I wouldn’t do that to him and must consider this factor. Buying a share of the house would enable either of us to inherit part of the other’s share in the house.
I am unclear on what interest rates are for reverse mortgages, if he were to go through an official lender, but I know they are higher than typical mortgages and also have various fees. What are your thoughts on my situation, and the ways to free up equity to fund more expenses, enabling us to enjoy life more?
I don’t see why your boyfriend should release equity in his $2.2 million home to fund your lifestyle(s). – MarketWatch illustration
You want him to live the lifestyle to which you have become accustomed.
You buying a share of his house would be a cleaner way of releasing equity, although he would be giving up his most prized possession — his financial independence. You could also offer him a reverse mortgage or a private loan. Both of those options would complicate your finances — and your relationship. The less messy but more expensive option for him would be to take out a reverse mortgage or HELOC through a lender (they come with credit checks and fees). However, I recommend none of the above.
I understand your dilemma: What is the point of having accumulated a net worth of $7.3 million if you can’t enjoy it? What happens if you meet someone who doesn’t have the same level of wealth and can’t afford to do all the things that you would like to do together? The answer, as you see it, is for him to release equity from his home so you can both do whatever you want to do. If he agrees to this, you have a way forward.
But that’s where I come in to spoil your plans. I don’t believe it’s a good idea for you to fund a reverse mortgage or HELOC so your partner can afford to do more activities and take more trips. His home is his safe space, and it represents financial independence, especially if it’s paid off or close to it. He also has a rental apartment, which would generate $300,000 if sold. It would be folly to spend all of that on living the high life.
Secondly, unless your mission is to move to Florida for the winter and join President Donald Trump’s Mar-a-Lago country club in Palm Beach, which has an initiation fee of $1 million, I don’t see why your boyfriend should release equity in his $2.2 million home to fund your lifestyle. Because from your telling it is your lifestyle, not his, and $300,000 as play money for a 73-year-old man who has $4,000 in rental income and $2,600 in Social Security is a helluva lot of money.
Thirdly, your partner has $300,000 left on his mortgage. If he wishes to live comfortably and free up more money, I suggest he use some of the money from the sale of his rental home not to fund a lavish lifestyle with his partner of two and a half years, but rather to pay off some of that mortgage so he has a more comfortable cushion between his income and expenditures. The two of you could break up. Your relationship, as you say, could evolve into friendship. He might need long-term care.
Fourthly, if you decided to spend money now with the expectation that your partner would leave you X amount in his will, he could later change his mind if your relationship ended acrimoniously (or even amicably). On the other hand, loaning him money through a HELOC or reverse mortgage, overcomplicates your financial lives and puts a lot of pressure on your personal life. It would also create an unhealthy power imbalance.
Your letter arrives at an interesting time. This week, I received an email from a reader complaining about how this column runs so many letters from people who appear to have more wealth than they seem to know what to do with. It’s true. I receive a lot of letters from people who have a net worth of $1 million, $5 million or more. These questions relate more to money management and distribution than to accumulation.
In part, this reflects the nature of a column called The Moneyist and the broader readership of a news organization that focuses on investing. But readers tend to be more easily irritated by people with lots of money who have problems. Perhaps understandably, they ask, “What do these people have to complain about?” They say, “If I had $7 million, I’d never have to write to an advice columnist.”
But as I pointed out to the reader who emailed me, I also answer questions from people who have very little money: the mother who lives with her daughter and her daughter’s boyfriend; the woman who wonders whether she should help pay off her boyfriend’s $67,000 in student debt; the couple with Alzheimer’s and stage IV kidney disease who just inherited $50,000, which is a lot of money for them; and the 70-year-old widow who has struggled financially.
This brings me back to your dilemma. It allows us to put your question into context. That helps restore perspective (yes, not everyone’s financial situations or priorities or dilemmas are equal) and compassion (your problem is just as important to you as the one facing the couple who wonder whether they should allow neighbors who lost their home in a fire to stay in their rental unit). Money itself does not make you happy. However, it does make life easier in many ways.
Your problem is one of distribution rather than accumulation. In the case of your partner, it’s one of liquidation. How can he free up some of his assets so you can do more together? Taking cruises costs money. Traveling to Europe costs thousands of dollars, especially if you want to do it in style. Joining a country club to keep up with the Jones and the Jonases can be expensive. You could think creatively: What about doing a house swap with a couple in Florence or Bilbao for the summer?
I know I’m walking a fine line between the letters that say, “You’re answering too many questions from people who have millions of dollars saved for retirement” and those that say “How dare you tell a person with millions of dollars how to spend their money?” To that point, I’m not telling you how to spend your money — you earned it. I’m suggesting that you not put pressure on your partner to spend money he doesn’t have. If you both only had each other and zero wealth, how would you spend your time?
You live life in the fast lane. He does not. Allow him to enjoy life at his pace.
