A Step-by-Step Guide for Starting a Conversation About Retirement
Once you get married, it’s normal to get bogged down by the multitude of financial responsibilities on your plate. You’ve got to save for a home, worry about all the expenses tied to having kids, think about a vacation fund, begin saving for college, and so on. With everything demanding your attention, it’s easy to de-prioritize your shared future or let it fall through the cracks. However, planning your retirement as a couple from the outset can make a significant difference when it finally comes time to leave the working world behind.
Taking the time to sit down early on to envision a future together – and putting a plan in place to make that vision come true – will help make your golden years something truly special. Here are seven steps to help guide you and your partner as you embark on your retirement planning journey.
Step 1: Look at the big picture.
What does your ideal retirement look like? Is it sitting on the beach somewhere tropical with your partner? Perhaps it’s filled with gardening and spending time with your grandkids. Whatever your dream retirement might look like, sit down with your spouse and discuss your visions for what the future looks like. There’s a chance that you’re both picturing very different things, as happens with many couples. However, sharing those dreams with one another ensures that you’re both on the same page moving forward.
Step 2: Work as a team.
If you are each looking at your retirement funds as solo projects, it’s time to change your mindset. Working together to build your retirement funds can help minimize your shared financial burden. Most likely you’re making financial decisions and big purchases together, so why wouldn’t you want to do the same during retirement? If your employer offers a 401(k) benefit but your partners doesn’t see if you can swing investing a bit more of your paycheck into your plan to help meet your retirement planning goals. Or, if one spouse is a stay-at-home parent, look into a spousal IRA, which affords couples the opportunity to save funds in a tax-deferred investment account for the unemployed spouse.
Small steps like these can help strengthen the bond between you and your spouse while also bringing you both closer to your dream retirement.
Step 3: Develop a Social Security strategy.
If you and your partner take the time to make a deliberate plan for when you’ll make your individual and spousal Social Security claims, you have a great opportunity to maximize your lifetime Social Security income. Make sure that your plan considers your age, the age of your claim, as well as your spouse.
If you’re unsure about how best to strategize your Social Security benefits, try talking to a financial advisor you trust about your various options.
Step 4: Establish an estimated income.
Setting realistic financial goals for retirement can help you and your spouse live a sustainable lifestyle over the years. You may be convinced that half of what you make now will be enough to support you in retirement, but if it turns out there’s not enough money for both of you to maintain your desired lifestyles, then a conversation is necessary.
Aligning these expectations early on when you’re still developing your retirement savings plan can save you both a lot of headaches down the road.
Step 5: Keep your beneficiaries up to date.
A 401(k) isn’t just an opportunity to save for retirement, but also a chance to think about the people you would want to pass your estate onto should anything happen to you. Typically, when first starting your 401(k), you include the name of any beneficiaries you want to have. However, when’s the last time that you updated that list? If there’s been any major life event such as a marriage, divorce, children, grandchildren, or a death in the family, it may be time to reevaluate who you want to receive your money should you pass on.
Step 6: If you’re thinking of retiring at the same time, reconsider.
Retiring is a huge life change that drastically transforms the way that your day-to-day life looks and feels. While it may seem like a fun idea to retire alongside your partner, the reality is that it may make the transition into retired life even more difficult. Planning it out so that your retirements are staggered can give you both the opportunity to ease into your retirement while still maintaining some semblance of ‘normal.’ It also provides each spouse the chance to establish their own daily routines, hobbies, new projects, and a social life that will ultimately make up this new phase of life.
Step 7: Should divorce seem likely, know your retirement benefits.
For those that are happily married, it’s unlikely that a discussion about divorce should ever come up when retirement planning. However, if your marriage is on shaky ground or you’ve had thoughts about ending a difficult marriage, then you’ll want to be intentional and work to secure your retirement savings and long-term plan.
This can involve finding ways to divide up retirement funds without incurring early withdrawal penalties, such as using a qualified domestic relations order (QDRO). There’s also a chance that you may be entitled to spousal support in retirement, as divorced or widowed spouses typically qualify for Social Security benefits. Be sure to talk to a professional about all the options available and what the best path forward may be.
It’s never too early to start planning for retirement. Planning your retirement as a couple from the beginning can be incredibly helpful when it finally comes time to retire. Take the time to sit down early on and envision what you want for your future together, then establish plans that will help make those dreams possible. These seven steps are meant to help guide you in the right direction as you embark on this exciting journey.
Developing a retirement plan can be daunting, but it doesn’t have to be. You just need the right tools and guidance from someone you trust who understands your personal goals and objectives. At Andersen Wealth Management, we know how important this stage of your life is, and we pride ourselves on helping people work towards the retirement of their dreams. If you and your partner feel like you would benefit from speaking with one of our professional advisors, please contact us today.