The Ultimate Guide to Retirement Planning for Couples
Retirement planning for couples is one of the most important things you can do for your marriage.
Whether you are the older or younger spouse, it's important that you are both on the same page regarding when and how you'll retire. Talking about your finances now and how you'll reach your financial goals will increase your chances of having the retirement of your dreams.
Understanding Retirement Planning as a Couple
Retirement planning as a couple has an entirely different feel than planning your own retirement.
Suddenly, you have another person's plans, feelings, and abilities to consider. That's why talking about retirement with your spouse early on can help you get on the same page before you're both so set in your ways that you can't see eye-to-eye when it comes time to retire.
The key to retirement planning for married couples is to have these discussions long before you hit retirement age so you can learn how to give and take, meeting one another in the middle. Consider asking one another these questions:
Where do you want to live when you retire?
Do you plan to work while in retirement?
What is your desired retirement lifestyle? Will you be taking it easy or have an active retirement?
Do you plan to wait until full retirement age to retire or retire sooner?
Assessing Your Current Financial Situation
Once you have an idea of where both partners stand with retirement, it's time to assess your current financial assets and debts and plan for retirement savings.
Openly discuss the following with your retirement partner:
Current investment strategy: Consider your investments and how they align with your desired financial goals, individually and jointly.
Amount of retirement savings: Evaluate how much you already have saved and whether you must contribute money in different increments or to different retirement accounts to reach your goals.
Potential retirement date: Determine when each partner plans to retire and determine how it will affect your retirement savings, whether you must access it immediately or have other savings to use in the meantime.
Creating a Joint Retirement Timeline
A joint retirement timeline can help you determine the best way to invest your money.
For example, if there is an age gap and one spouse has many years before retirement, you can invest his/her income more aggressively than the spouse who may retire within the next couple of years.
That's why a timeline is important. In your timeline, include when:
Each partner will stop working or cut down
Each partner will claim Social Security benefits
You must start accessing your retirement savings
Seeing the timeline can help you make more informed decisions about when each person should retire. Depending on what makes the most financial sense, you may need to change the plan slightly, either moving retirement for one or more spouses sooner or pushing it to later.
Conducting a Comprehensive Financial Assessment
With your retirement timeline in hand, you can conduct a more comprehensive financial assessment. You can do this yourself or work with a financial professional who can help you set up your investments to reach your financial goals.
When looking at your finances, consider:
When one partner retires, will you rely on your spousal benefits, or must you cover health insurance and healthcare expenses?
Is it necessary to withdraw from your retirement money immediately, or do you have a nest egg that can carry you through a couple of years?
How many years are there between your anticipated retirement date and life expectancy? This will determine how much money you need to retire comfortably.
Do you have the money saved to have the fulfilling retirement both you and your partner envision?
Planning for Healthcare
Many people unknowingly overlook one of the largest and most important expenses during retirement: healthcare.
According to Fidelity, the average 65-year-old needs $165,000 in after-tax savings to handle healthcare expenses, and this number increases every year. If you don't include healthcare in your retirement income needs, you could find yourself in dire financial situations as you age.
This is why if you're still young and employed or have a working partner, you should consider a Health Savings Plan. The HSA provides tax-advantaged funds to cover eligible medical expenses.
The good news is that you can roll the funds over each year to have adequate savings to cover these expenses during retirement.
Staggering Retirement Dates for Financial Benefits
Even if there isn't a large age difference between you and your spouse, there are certain benefits you can enjoy having staggered retirements. While it may not be your original retirement plan, it can benefit you as a couple financially. Here's how:
Delayed Social Security benefits: Most people can start taking Social Security at 62 but at a reduced rate. The longer you wait to take SSI, the more you'll receive monthly. Having one spouse delay retirement ensures at least one of you gets more Social Security income.
More time for savings: When one spouse continues to work, they can cover the living expenses and contribute to your savings to prolong when you must dig into your retirement funds.
Take advantage of catch-up contributions: If at least one spouse continues working after age 50, you have a larger threshold for how much you can contribute to your retirement plans, such as your 401K or IRA, allowing you more tax benefits and more time to build your retirement funds.
Access to more benefits: With one working spouse, you can have insurance and other benefits provided by their employer that you would lose if you both retired.
Regularly Reviewing and Updating Your Retirement Plan
No matter when you create your retirement plan, it's important to review and update it regularly.
Whether life changes in a way you didn't expect or you and your spouse change your ideas or goals, it's important to have an honest dialogue with one another throughout your working years, especially as you approach retirement, to ensure you're still on the same page and have the income to reach your lifestyle goals.
It's never too early or too late to pivot, changing your investments, beneficiary designations, or how much you contribute to retirement. The key is to have as many income sources as possible so that you and your spouse are ready no matter what life throws at you and your spouse.
Common Mistakes Couples Make in Retirement Planning
No matter how well you plan, sometimes there just isn't enough money, or mistakes are made. Here are some common mistakes married couples make in retirement planning that you can avoid:
Not estimating retirement expenses well enough: If you underestimate your retirement expenses, you may not have enough income to cover your needs. Working with a financial professional can help prevent these issues.
Relying on Social Security benefits: We all hope we'll have Social Security to lean on, but it's a filler; it shouldn't be the main income you rely on as it is not nearly enough for any couple.
Retiring too early: It can be exciting to think you never have to work again, but if you retire too early and don't have the retirement income to cover your expenses, your golden years may not be as happy as you anticipated.
Forgetting healthcare: Many couples focus on their current expenses, not thinking that their healthcare costs will increase and their employer may no longer provide health insurance. Ignoring these costs can throw any budget off course.
Not planning for taxes: A proper tax strategy is crucial to retirement planning. Knowing how much you'll be taxed and when can help you plan accordingly since it greatly affects how much money you put in your pocket during retirement.
Ready To Retire Stress-Free? Let’s Plan Your Financial Future!
It's hard to start the conversation.
No one wants to think about getting old and giving up their career, but retirement planning for couples is a tremendous part of your marriage. Talking about your plans early can ensure you are both on the same page, and if you aren't, you have time to figure out how to find a middle ground.
If you're ready to get you and your spouse on the same page and on the path to reaching your financial goals, contact me today to start planning your financial future.
We'll make it stress-free so that you and your spouse can continue to live in a peaceful marriage that ensures a harmonious future.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
