To create a successful retirement plan for couples, it takes two.
Continue Reading Below
Both individuals in a partnership need to be involved and fully committed to creating and executing a savings plan.
Dan Keady, senior director of Financial Planning at TIAA-CREF, says planning for retirement is one of the biggest financial decisions couples will make together—yet most couples don’t talk about it until it’s right around the corner.
He suggests couples meet with a financial advisor periodically to establish a savings plan that both people are comfortable with to increase the commitment. “Both spouses need to be aware of their financial situation to help them determine the amount of income they will have to live off of in retirement and to help them agree on retirement goals.”
He recommends the first step every pair takes is defining what retirement means to each person. Once this is clear, it’s easier to set boundaries and build clear-cut expectations.
But what happens if one person doesn’t get on board with the savings plan and retirement is fast approaching?
“Often, couples may have drastically different ideas about how they want to spend their later years,” Keady says. “Retirement, like buying a house, is a major financial and life transition that comes with some compromises.”
When a couple is approaching retirement, agreeing how they are going to spend their money is crucial—especially now that a steady paycheck isn’t coming in.
“Are you okay with using all of your savings in retirement, or do you want to leave money or assets behind for your family or a charitable cause?” Keady suggests asking.
Once a couple has established broad financial parameters, he says it’s time to set priorities:
- What do you see yourself doing in retirement?
- Do you plan to travel?•
- Would you rather move closer to the children and grandchildren?
- What social activities, such as volunteering or charity work, would you like to do?
- How much do you want to spend on leisure activities?
Each person should make a list of individual retirement goals and then compare and pare down the list so they better coordinate. Where expectations differ, each person should rank them in importance. “Which items would make retirement seem like a failure if you didn’t do them? Which ones could you live without?” This will help develop a list of common retirement goals.
Any retirement hobbies should be taken into account to make sure they are properly worked into the retirement fund. “If you plan to buy a sailboat, for example, have you learned to sail? You might want to invest in lessons while you’re still earning an income.”
As couples age, they must think about their health and insurance coverage to make sure one person won’t be loaded with debt in the case of the other’s passing.
“By exploring these issues, you and your spouse or partner can chart a course toward a smooth retirement,” Keady says. “As with any journey, there will be changes in direction along the way, but having an idea of where you’re headed with retirement planning will make these easier to navigate. “