Will They Be Ready?
Washington Post Staff Writer
Sunday, September 26, 1999; Page H4
Sojourner, the former “shadow” member of the House of Representatives from the District and an unsuccessful candidate for D.C. Council, is a management consultant who lives in the Brookland section of Washington with her domestic partner of eight years, Letitia Gomez.Their concerns are “similar to most couples in that we want to make sure we can live comfortably—we’re not looking to live extravagantly” in retirement, said Sojourner. But their retirement plans are different from those of most other couples in that—because they can’t legally marry—Sojourner can’t count on receiving survivor benefits from Gomez’s pension plan or Social Security, and Gomez can’t count on receiving survivor benefits from Sojourner’s Social Security. This is more of a potential problem for Sojourner, since Gomez earns substantially more. If Gomez were to die first, Sojourner would have a hard time making ends meet. Their problem arises from the fact that most employers—including the federal government—don’t provide survivor benefits for domestic partners, nor does Social Security. Gomez may leave the portion of her tax-deferred savings plan that she contributed to Sojourner, but not the portion contributed by the Navy. Laurence J. Kotlikoff, an economist at Boston University and the author of “Generational Accounting: What Determines Savings?,” analyzed the couple’s financial plans using Economic Security Planner (ESPlanner)—a software that he and two other economists have developed. Sojourner and Gomez want to save for an emergency fund, and Kotlikoff recommended that they do it through instruments that are non-tax-favored—which allow money to be withdrawn readily, without paying taxes or penalties, such as CDs and money-market funds. ESPlanner recommended that the couple immediately increase their non-tax-favored saving by about $1,000 a year and reduce spending by the same amount, gradually increasing annual savings to about $3,400 by 2008. Each woman anticipates receiving an inheritance while in her sixties. That money should go straight into savings, according to Kotlikoff’s analysis. Because Gomez earns substantially more than Sojourner, Kotlikoff recommended that Gomez increase the amount for which her life is insured from $200,000 to $431,374. But he recommended that Sojourner stop buying life insurance because Gomez earns enough that she won’t need it, and they would do better to save the money being spent on insurance premiums.
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