When couples are first married, there is a lot of financial planning that needs to be taken care of immediately. You need to think about the cost of raising kids, putting them through college, taking vacations, fixing up the house, and so on. Once you finally get into the swing of married life, it can be easy to coast through to forget about planning for a shared retirement with your spouse. Do not let this happen to you!
Retirement with your partner might just be the best period of your marriage, but only if you approach it the right way. Here is some of the best advice on how to plan for retirement as a couple…
You are both ultimately responsible for your own finances when it comes to retirement, but just as you are making the big financial decisions together right now, you should be making a point of saving for retirement together as well. Start by establishing whether your spouse is on a 401(k). If they are not, is there a way for you to afford a little more pre-tax income added onto your own plan to reach the goals the two of you share? If you or your partner is not working, you may want to look into a Spousal IRA. This will allow you to put funds aside in a tax-deferred account for the benefit of unemployed spouses. Start putting your cards on the table when saving for retirement, and you and your partner will find it so much easier to plan a brighter future.
Strategize your Social Security
Married couples have an excellent opportunity to max out their social security income in the long term by timing both their spousal and individual claims in the right way. Just what is the “right way”, you might be wondering? This all depends on your goals, your age, the age of your spouse and the age of your claim. Applying a little careful planning in the years leading up to age 62, which is the earliest point when you can start collecting, can make a serious, positive difference to the guaranteed income you and your spouse have from here on.
Check Over your Beneficiaries
When you first started your retirement fund, you will probably remember that you had to give the name of at least one beneficiary – the people who would receive the money in the fund when you pass away. Take some time to check this information again, and make sure that it is as up-to-date as possible. You need to consider the possibility of any major life events in the future that could lead to you re-evaluating the way that you have listed your beneficiaries. Your eldest child’s relationship may seem solid right now, but things can change, and you may be surprised by the news of a divorce sometime in the future. Unless one of you has opted for tubal ligation or male sterilisation, there may even be a chance that you have another child in the future. Changing the beneficiaries of your retirement savings can be done easily through your brokerage firm or through the HR department at your work. Just make sure that you do not put it off if you feel you do want to change your beneficiaries. Leaving this decision too late can lead to all kinds of conflict and complications.
Think About your Shared Income Needs
Depending on the stage you are at in your life, it may be easy or hard to gauge the kind of money you will need in your retirement. It is also common for couples to have disagreements over the amount of money they should have access to, even minor ones. You might be convinced that you can make a budget work for you using around half of your current income, whereas your partner might want to lead a slightly more pampered lifestyle, which needs something closer to the amount of disposable income you have right now. Sit down with your partner and talk about your income needs well ahead of time. This will help you align your expectations, and formulate a realistic plan that works for both of you.
Don’t Retire at the Same Time
Talk to a cross-section of retirees, and you will probably hear this exact same advice, backed up by a number of different stories. Sure, entering retirement at the exact same time as your partner may sound like a fun decision to make. However, doing this can lead to a range of different adjustments that it can be very difficult for two people to go through at the same time, especially if you’re as comfortable bickering with your spouse as most people! By making sure one partner retires a little later than the other, you’ll give both of you a better opportunity to get used to your new freedoms, daily routines, as well as your hobbies and social life out of the house. Many people are surprised how much adjustment a typical retirement requires, so do not go in thinking that you can wing it! Avoid retiring at the same time, and the transition will be much easier for both of you.
Understand What Divorce Means for Retirement
Of course, if you are happily married after all these years, you should not talk about divorce in relation to your retirement plans as a couple. However, if you can see the marriage ending, and there are assets on the table, you need to work to secure your own savings and assure the progress of your long-term plan. Separating assets during divorce can extend into your retirement plans, through documentation that will allow you to divide the money in a given fund without having to worry about any early withdrawal fees. Furthermore, you may be entitled to financial support from your spouse in retirement.
Whether it is several decades away or just around the corner, planning for retirement with your partner is extremely important, and something that you need to approach in an informed, proactive way. Keep this advice in mind as you move forward with your plans!