When you’re married or in a committed relationship and approaching retirement, planning your golden years is a dual effort. Saving for retirement as a couple can have some advantages, but certain financial decisions are more complicated for couples. Aside from money, the onset of extra free time in retirement can challenge a couple’s relationship in new ways. Setting expectations early on and planning for changes ahead of time can help couples design their ideal retirement.
[Read: 10 Tips to Help Your Marriage Survive Retirement.]
Shared expectations. An important aspect of planning for retirement for couples is getting on the same page. Establish what you each want to get out of retirement, both as a couple and individually, in the early planning phases. Decide what kind of lifestyle you want to live in retirement. Some retirees plan to be active and travel, while others are more comfortable at home. Once your retirement lifestyle is defined, it will be easier to estimate the savings and income you need to make it happen. When one partner’s expectations are not met, it can lead to negative feelings toward the other spouse. Strive to achieve a retirement that is mutually enjoyable and rewarding.
Money management. How you manage your money prior to retirement will impact your retirement savings and spending strategies. For example, a retiring couple who married in their 20s may have different ideas on combining finances than couples who marry closer to retirement age. Most couples will carry on financially as they did in their working years with one partner usually taking the lead.
For couples who chose to keep finances separate, clearly define shared and individual expenses and keep both joint and personal budgets. Recognize that one partner may be able to retire earlier than the other. Communicate your desired goals and milestones and support each other along the way. Remember to optimize your withdrawal strategy by utilizing tax-advantaged accounts to their fullest potential.
[Read: 6 Retirement Conversations Every Couple Needs to Have.]
Financial communication. Once your expectations and financial goals are aligned, communication still plays an important role to remain in sync with your money needs. Schedule regular discussions about your budget and upcoming large expenditures such as home repairs, travel or large purchases such as a car. This may come easily to couples who have combined their finances for decades, but it can be challenging for more recently married couples who keep their finances separate.
Pension benefits. Pension beneficiaries are usually given at least two options to receive their benefits, either single or joint and survivor payments. A single benefit covers the life of the worker with the pension, but when that person dies, the payment usually ends. If the spouse is reliant upon this income, he or she may experience a budget shortfall upon the death of the pension beneficiary. The joint and survivor benefit option can mitigate that risk by covering the surviving spouse after the primary beneficiary passes away. The payout is lower, but continues for the life of the surviving spouse.
When planning for retirement and choosing the terms of your payout, consider the long-term needs of both members of the couple in the event of a premature death of either partner. Depending on your age at retirement and life expectancy, the larger payout of the single benefit may be the better option, especially if there are other income sources and a budget surplus to invest for growth and future use. Alternatively, if the pension serves as the primary income source, it may be wiser to choose the joint and survivor option. Since this decision will have a lasting impact on your long-term financial health, consider consulting with a financial advisor before finalizing your pension benefit selection.
Social Security. Your Social Security benefit includes spousal and survivor benefits, which ensures that the death of a partner does not induce financial hardship on the surviving spouse. The spousal benefit is worth half of the benefit of the higher earning spouse if that’s larger than the spouse’s own earned benefit. If the higher earning partner dies before the lower earning spouse, the lower earning surviving spouse will then receive the higher earner’s benefit amount. Also, the longer you delay acceptance of Social Security benefits, the bigger the monthly payout for both partners.
[Read: 10 Ways to Increase Your Social Security Payments.]
Housing. Housing is a primary consideration when planning for retirement. Staying in your pre-retirement home is a common practice, but retirement can be a good time to downsize, move to a warmer climate or choose a tax-friendly state. Share your preferences and understand what your partner wants in the early and later years of retirement. Family considerations, social circles and other factors may be important for both of you.
Evaluate your housing needs for all stages of retirement, and consider adjusting when your needs change. Remember that changes in health can have an impact on your housing requirements. Yard work and stairs may be fine in the early years of retirement, but the house you spent most of your lives in may not be the ideal home indefinitely.
Activities. Some retirees become bored once they enter their non-working years. Part of your retirement plan should include plenty of hobbies and interests to occupy your time. Couples have the additional task of planning shared and separate time. Time apart is just as important as spending time together. Understand the companionship needs of your partner while communicating your own. Plan activities with your individual friends and with couples you and your spouse both enjoy spending time with. Catering to the social needs of your partner and yourself will help ensure your relationship remains strong.
Craig Stephens is a blogger at Retire Before Dad.
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A Couple’s Guide to Retirement Planning originally appeared on usnews.com
