When it comes to saving for retirement, we all need to have a sound strategy in place to live comfortably beyond our working years. But for couples, planning for retirement requires more than just a strategy—it takes communication, openness and coordination as well.
Whether you’re young or close to retirement age, married or unmarried, you need to work with your partner to plot out your retirement future. Here are several key ways that couples can avoid issues when they are on their retirement savings journey.
Start by Being Honest About Plans and Dreams
Planning for retirement as an individual can be stressful enough. But when you’re planning with your partner, you might face the additional challenge of negotiating different personal goals and expectations. As with any conversation about money and saving, the retirement planning conversation can open up a world of disagreements and pitfalls. But if done correctly, you and your partner can achieve your dreams together, whatever your lifestyle or goals.
Start your discussion by making sure each of you is being open about your vision for retirement. Do you both want to live an active lifestyle full of travel and adventure, or will you prioritize passing on your money to your children? Are you both in agreement about spending carefully during your working years in order to save for retirement? Do you both agree on how much you’ll need in your retirement fund to live comfortably? These conversations should be ongoing, as you develop your retirement vision.
You also need to be clear-eyed about what it will take to accomplish your goals. Say you both want to retire and move to a lake house, or you both want to downsize to a condo so you can travel. Whatever your vision is, you’ll need to come up with a savings plan together. Make sure you each can state your desires, so that you can work together to realize your goals.
Understand Whose Money Is Whose
If you and your partner keep your bank accounts separate during your working years, you might want to maintain that situation in retirement. Discuss whether your separate retirement accounts represent your own money or whether they’ll be used for a joint or household retirement fund.
You should also consider who owns what assets, starting with the home you share. If a home is owned by one person in the relationship, you might consider putting the other partner’s name on the mortgage or title as you near retirement age. Or, if you plan on having separate retirement accounts, you’ll want to account for the value of the asset that one partner is bringing to the table. The key is to be clear about who owns what to avoid friction.
Couples who decide not to get married should take additional planning steps to ensure that any assets and retirement savings in one partner’s name will be transferred to the other partner in the event of death or illness. Partners who have children from previous relationships need to be clear if they plan on setting aside a portion of their retirement savings to pass on to their child.
Discuss Your Income Streams
Take your discussion about money and assets a step further by digging into the details of income streams and retirement planning tools.
List the income streams that you can tap once you retire. These include 401(k)s, pensions, mutual funds, savings accounts and annuities. If you have a pension, make sure to jointly list your survivor so that they’ll receive survivor payments when you pass away. Also consider including your spouse or partner as the beneficiary of any stocks, exchange-traded funds or mutual funds currently in your name only. If you would prefer that your children—or another person—should be the beneficiary on your accounts, you should discuss that with your partner before you set it in motion.
Social Security and Medicare payments are yet another source of retirement income. Your Social Security also includes spousal benefits, so that if one partner passes away, that income will accrue to the surviving partner. If one partner earns more and passes away, the lower-earning surviving partner will then receive a higher benefit amount, as long as they’re legally a spouse or domestic partner.
Maintain Open Lines of Communication
Being on the same page when it comes to planning for retirement is only part of the equation. Keeping open lines of communication throughout your lives—as you near retirement age and after you retire—is necessary to avoid hiccups. When financial problems do arise, discuss them with your partner sooner rather than later.
Keep in mind that it may be necessary to adjust even the best-laid plans. It’s quite common for couples to spend beyond their means during the first few years of retirement, especially on unpredictable healthcare costs. If this happens to you, you may need to readjust your goals and behaviors—and you don’t want to be at cross-purposes with your partner.
Make sure that one person in the relationship isn’t acting alone to address financial issues. If the solution to a problem, such as reduced Social Security payouts, involves reallocating funds or scaling back on spending, you’ll want to have the buy-in of both partners.
Learn Together
In some cases, you and your partner may have different levels of financial literacy and acumen. That’s OK! If this is the case, work together to make sure you are on the same page.
This is where a financial planner can be particularly helpful. If there’s a gap in financial knowledge between you and your partner—or if one partner isn’t as involved in the family budget as the other would like—then a third party can help explain any difficult concepts and get both parties aligned.
Avoid Secretive Behaviors
If you are going to work together toward a common goal, you’ll need to avoid “financial infidelity” as best you can. When one partner is making secretive money decisions—from making large purchases to drawing from retirement savings—this can put a strain on finances and on the relationship.
This is particularly important for couples who choose to have separate lines of retirement savings. And if you and your spouse became a couple later in life, you may not have had time to discuss differences in spending and saving habits. The bottom line is that each partner needs to be honest about their spending and saving.
Consider Retiring on Separate Timelines
It can be tempting for a couple to say, “We’ll both retire in eight years.” But for two people who are at different ages, staggering the time of retirement can go a long way toward reaching those retirement savings goals.
Consider a couple in which one partner is 66 and the other is 60. If the younger partner works for six more years, the Social Security payout, which grows as you get older, will increase enormously. So if the older partner is in good health, the couple might want to put their travel plans on hold for a few more years.
This goes beyond finances: The working-age partner just might not be ready to retire and leave their working life behind. This highlights once again the importance of being forthright and communicative about all aspects of retirement.
Be Realistic
There is no way around it: Retirement will eventually end in death. That’s why you and your partner should have clear plans in place for how to handle savings so that the survivor can benefit. Honestly assess the health and age of each partner so that you can plan accordingly. Review spousal benefits, discuss estate plans and consider life insurance policies.
This part of retirement planning isn’t always easy. Consider talking with a financial advisor or planner, as they can often help facilitate delicate discussions. Just remember, difficult conversations are essential when it comes to planning for retirement.
William Myers is a financial writer based in Dallas.
Illustration by Jack Hudson
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