Plan for Retirement As a Couple

Planning for retirement with your partner requires a significant level of cooperation and compromise. You will need to discuss what you want your retirement to look like and strategize about how to save for it. You will also want to look for ways to maximize your savings as a retired couple and work your various investments in your favor. By creating a solid retirement plan and taking advantage of your savings options, you and your partner can ensure that your retirement is financially sound.

Steps

Establishing your Retirement Goals

1. Talk about your long-term goals. As you and your partner begin planning for retirement, it is important that you clearly communicate what you want out of it. Many couples fail to talk about retirement with their partner, which can lead to incompatible plans and a failure to save properly. Talk with your partner about your retirement savings and ask yourselves what you want to do once you have retired. Answer these questions with your partner:
   • At what age do you want to retire
   • Where do you want to live after retirement?
   • What do you want to do after retirement
   • Do you want to leave an estate for others?
   • Do you intend to travel a lot? Will you buy a big-ticket item like an RV or mobile home?
2. Project your future income at retirement. Look at your shared income. Calculate how much money you and your partner will have from guaranteed sources that will not depreciate and that you will get every month. Adding up these sources of guaranteed income will give you and your partner a better idea of what your baseline income will be during retirement.
   • Guaranteed sources of income include things like Get a Pension, social security, and annuity payments.
3. Estimate your retirement expenses. Once you and your partner have an idea of what you want your retirement to look like, you should try to estimate what your expenses will be in retirement. Create a budget that takes into account your current spending, as well as those things that you anticipate needing to pay for during retirement.
   • Estimate your base expenses — food, shelter, transportation, health care, and other basic needs.
   • Once you have established your base expenses, consider discretionary needs such as travel, relocation, etc.
   • Keep in mind, too there may be unforeseen medical or home expenses that can eat at your savings. It is always a good idea to err on the side of caution when saving.
4. Calculate your income/savings gap. Compare your estimated expenses with your guaranteed income. For most people, the guaranteed income will not be enough to cover all of the estimated expenses. Therefore, you will need to save some money to make up this gap.
   • For example, if your annual guaranteed income is $30,000, but your estimated expenses are $60,000, you will need to save enough money to cover the $30,000 gap.
5. Consider your longevity. Although we all hope to live long lives, outliving your savings can make things difficult for you and your family members. Ideally, you will want to save enough money to meet all of your expenses as you age and avoid running out of funds at a certain point. To avoid running out of savings, err on the side of caution and save as if you and your partner are going to live longer than average.
   • In order to get a sense of how long you may live, look at you and your partner’s family history. If you both have parents or grandparents that lived well into old age, you should save money to support yourselves beyond the average life span.
   • In the United States, the typical 65-year-old male today will, on average, live to the age of about 84. The average 65-year-old woman will live to almost 87.
6. Project the required savings to fulfill retirement goals. Once you have determined your guaranteed income, savings gap, and considered your longevity, you can begin to calculate how much money you need for retirement. You will need to multiply the annual savings gap times your projected longevity, which will tell you how much money you need to save before you can retire. You can work with a retirement planner to help or use an online retirement income calculator.
   • Use a retirement income calculator to help you determine how much you need to save:
     • CNN Money: http://money.cnn.com/calculator/retirement/retirement-need/
     • AARP:http://www.aarp.org/work/retirement-planning/retirement_calculator.html
     • Bankrate: http://www.bankrate.com/calculators/retirement/retirement-plan-income-calculator.aspx
   • Remember to factor for inflation. If you and your partner plan your retirement far enough in advance, you will need to be considerate of inflation. Inflation can dramatically affect your return on investments, increasing or decreasing how much money you have during retirement. Although a good return would be welcome, you will want to make sure that you have enough money saved to cover a poor return on your investments.
7. Make clear who your beneficiaries are. Because retirement savings are legally designed for individuals only, you will need to make it clear who will get your retirement benefits if you die. Ideally, you would name your partner since the two of you will have shared expenses. For things like pensions and 401(k)s you will want to make sure that your list your partner as your beneficiary.
   • If your marital status changes, it is important that you update your information with your brokerage firm or the human resources department at your work.

Managing Your Assets for Retirement

1. Increase your annual savings rate. Start saving and investing as much as you can today. Increase saving as your income increases and as obligations — such as supporting children through school, etc. — decrease. Even increasing your savings by just 1% can make a huge difference.
   • The earlier you start saving, and the more you put toward your savings, the less you'll have to worry about making a risky investment later in life to try and make up your savings gap. A low-risk, long-term investment can help you safely put away money for retirement.
2. Take advantage of being married. Married couples are eligible for a variety of benefits when it comes to retirement. If you and your partner are married, you should utilize these advantages to get the most out of your savings. Look at your finances or talk to a financial planner to determine the ways in which your marital status can work for you.
   • For example, if you and your partner both have 401(k)s through your work, you can defer twice as much money as a single person. You can also make decisions about putting more money into the 401(k) that has better employer contributions.
   • Married couples also have higher income limits on IRAs than single people.
3. Contribute to your 401(K). One of the best options for retirement is a 401(k). This employer-sponsored savings plan allows employees to invest money from their paycheck before taxes are taken out. If you and your partner both have 401(k) plans, you can defer paying taxes on as much as $36,000 as a couple. However, if you cannot max out both plans, try to put money towards the plan that has the better employer contributions or the lower cost funds.
   • If only one you has a 401(k), try to prioritize saving towards that plan since it has the most benefits.
   • Talk with your company’s HR department or a financial planner to make sure that you are taking full advantage of your 401(k)s.
4. Use an IRA. Traditional and Roth IRAs are great for couples who have maxed out their 401(k)s or are simply looking for a second savings option. Although they do not have the same tax benefits as a 401(k), they can help a married couple avoid paying taxes on their income. However, your income and other savings options determine your eligibility for an IRA.
   • Talk with a financial planner about whether a traditional or a Roth IRA will work for you and your partner.
5. Consider stock market investments. If you make too much money for an IRA, you and your partner might want to consider investing some of your savings with a brokerage firm. These firms will help you build a portfolio of investments that should appreciate over time. However, it is important that you and your partner are on the same page concerning what investments are in your portfolio and how it is managed.
   • You have many options when it comes to investing. Mutual funds, ETFs, and individual stocks and bonds are all possibilities.
6. Consider income real estate for additional diversification. If you have the time and resources, you and your partner might consider investing in real estate. Depending on the market, you might see large returns on your initial investment; however, if property values go down or your property is damaged, you may lose a significant chunk of your investment. Rental properties in particular, require a lot of time and effort to maintain the value of your investment.
   • The rent that you collect from a property may be a nice way to supplement your income during retirement.

Manage Your Income at Retirement

1. Stagger your retirements. Although it might seem nice to retire at the same time, adjusting to your new routines concurrently may be difficult. Besides navigating your new routines, you may also have a significant and immediate diminishment in your dual income. To avoid this, it may be best to stagger your retirements so that you still have one solid income while the other person adjusts to retirement. This will help you and your partner put away some more money and make the transition to retirement much easier.
   • Talk with your partner about your work conditions. If your partner hates their job and you like yours, let your partner retire first and stick with your career a little longer.
2. Be strategic about your social security claims. When you and your partner are planning your retirement, you want to try to maximize your social security benefits. Depending on your income and the age of you and your partner, you can time your retirement in a way that gets the best returns. Because there are over 8,000 different claiming possibilities for married couples, you may want to talk to a financial planner to determine what will work best for you and your partner.
   • Try to put off retirement for as long as you can after the age of 62. This is the age when you can start claiming social security, but there are substantial penalties for early payments. Consider delaying raking payments until age 70.
3. Apply for the saver’s credit. If you and your partner make less than $61,500 annually and contribute to a retirement plan, you are eligible for the saver’s credit. When you put money into a savings plan, this credit rewards you for saving money by offsetting some tax on your income. You can save between 10 and 50 percent of the amount you save for retirement each month.

References

See also

• Make a Retirement Gift Basket
• Know How Much to Give for a Retirement Gift
• Make a Retirement Scrapbook
• Use Life Insurance in Your Retirement Planning
• Transfer Retirement Funds to a Roth Ira
• Start a Retirement Home in Ontario
• Retire from a Job You Love
• Prepare for Early Retirement
• Prepare for Retirement in Your 20s
• Plan for Long Term Care

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