You and your spouse want to be in synch when it comes to retirement planning. You have, after all, partnered on things like buying a house, raising kids, and planning for college. Don’t overlook the importance of working together on your retirement strategies, too. While dollars and cents are a critical component of your preparation, so too are other areas that one or both of you may take for granted.
Here are seven areas of retirement planning where partners should find common ground.
1. Save for Retirement as a Team.
I’m sure you and your spouse talk about life finances regularly – things like when to buy a new car, whether to move once the kids have gone off the college, etc. But are you talking about your financial retirement needs? While theoretically, you are each responsible for your own plan, retiring with your spouse doesn’t happen in a vacuum; ideally, you should be planning and saving for retirement as a team.
Access where you are and where you want to be. Are you and your spouse participating in a 401(k)? For instance, if you are an employee with a 401(k) and your spouse is self-employed as a contractor, consultant or small business owner, look into an IRA and also consider adding more pre-tax income into your 401(k). If one of you is unemployed, an IRA works here, too. It allows you to put aside funds in a tax-deferred investment account for this spouse’s benefit.
2. Talk About Your Desired Retirement Budget.
Sit down together and make a retirement spending budget based on your shared vision of post-work life. Depending on your retirement time horizon, this could be a broad strokes budget or something more specific. Maybe you believe you can have a happy retirement on half of your current monthly income. Does your spouse agree, or are they planning a lifestyle based on the same level of income you’re earning together now? By aligning your expectations, you’ll create a realistic plan that works for you both.
3. Have a Strategy for When to Take Your Social Security Benefits.
With some educated planning, you can maximize your lifetime Social Security income. This process requires good timing and an understanding of some of the lesser-known rules of Social Security. Deciding when to begin taking your benefit will depend on your needs, your age and the age of your spouse. But, with some careful planning in the years before you both turn age 62 (the earliest at which you can start collecting), you can make a difference in both your payout and your spouse’s.
4. Make Sure You Understand Retirement Spousal Benefits After a Divorce.
If your marriage is coming to an end and retirement assets are on the mediation table, work to ensure you get your share of the retirement savings.
Many people don’t know that the separation of marital assets can extend to retirement plans, but it does. Called a qualified domestic relations order (QDRO), this order from the court splits the money equitably without early withdrawal penalties. Plus, divorced or widowed spouses qualify for Social Security benefits based on their former spouse’s earnings.
5. Update Your Beneficiary Designations as Needed.
When you first started your 401(k) or IRA and completed the paperwork, you had to designate one or more beneficiaries – the person or people who will receive the money if you should die. Keep this information up to date. If there is a life change, such as a marriage or divorce and remarriage, the birth of a child or a family death, make sure to update your beneficiaries. All you need to do is contact the HR representative who administers your company’s 401(k) plan, or the brokerage firm for your IRA.
6. Consider Staggering Your Retirements.
While hosting a joint-retirement party with your spouse may sound like a wonderful idea, once the confetti has settled reality will set in. Navigating this considerable life transition at the same time could prove difficult. You may want to consider staggering your retirements. This way, each spouse will hopefully create their own daily routines, nurture their core pursuits, and engage in an active social life.
7. What Does the Future Look Like for Each of You?
Sit down with your spouse and dream. How does your ideal retirement look? How about that of your spouse? Do you want to travel America in an RV, while your spouse wants to spend your Golden Years abroad? Talk about each other’s goals and be flexible. Doing so will help you work toward compromise and a shared ideal.
This may all sound like a lot of work, but it’s worth it. And, you may find that dreaming together about your retirement is fun – you get a chance to discuss and chart out how your Golden Years will look. So, if you haven’t done so already, my advice is to sit down with one another and check these things off your list. It will make for a more informed – and happier – retirement for both of you.
