When planning for your retirement, you tend to go for what you fancy.
However, when you are married, the game changes. You have to recognize the financial needs and expectations of your partner. You also have to find a way of balancing your partner’s expectations with yours and coming with a workable compromise.
However, just like many things when it comes to relationships, this may not be as simplistic as it sounds. Finance remains a grey area for many couples and has been a cause for divorce.
A survey conducted by Fidelity Investments found that couples with a high debt burden argued significantly more (67%) about money than those couples who were not burdened with debt (41%)
As such, couples should make sure that they have a full picture of that their retirement. Making retirement decisions with a common purpose sets the foundation for a more financially secure retirement. Here are ways in which couples can plan for their retirement and live happily ever after.
When couples think of their earnings as 'our' money, and not 'his' or 'her' money, then planning for retirement would be much easier.
This is especially important for people who have gone through messy divorces as there tends to be some mistrust and reservation when it comes to money due to experience and baggage from the previous relationship.
Having a collective stance on money helps with budgeting and saving towards that dream retirement.
It helps couples keep each other in check and ensure that no one goes out of line to derail the plan. As such, couples should set their financial priorities together. There should be a shared vision on how to tackle debt, pay for mortgage, save for your kids’ education, and of course plan for retirement.
Couples should agree on the amount they are willing to contribute towards retirement and stick to it.
However, agreeing on an amount can be quite tricky because of differences in income. Contributing the same amount may mean one partner would have to contribute more of their income and vice versa.
One way to get around this is by contributing a percentage of your income. Though this means the amount contributed would be different, it sort of balances the burden that comes with saving.
It is very possible that one partner would retire from work before the other due to age differences and career nature.
This means the pace of contributions would reduce, as one partner would no longer be able to contribute to the retirement account. This may put some skids on the path to retiring financially free. As such, couples have to factor in their service years when planning for retirement.
This would enable them to better absorb the shock that comes with one partner not being able to contribute to the retirement account.
On the flip side, retiring at different times can also be beneficial to couples if properly managed. This period can be used to test run life after retirement which can enable the couple to make the necessary fiscal adjustment. This inadvertently allows them to prepare better for a financially free life at retirement.
Planning for retirement transcends beyond making contributions to your 401(k) or IRA account.
To increase the size of your capital, and beat inflation, it is always advisable to invest your money. However, this could also be a source of distress, because everyone has different approaches to investment.
Differences in knowledge, capital, and risk appetite could mean that partners have different investment preferences.
In situations like this, it is best you first outline your objectives, then look for suitable investment vehicles. If you are closer to retirement and would want your investment to be more liquid, you can consider investing in shares or index funds.
If you have a long time before retirement, perhaps bonds, treasury bills and certificates of deposit may suffice. Alternatively, you can seek the services of a financial planner.
Health condition is often overlooked when planning for retirement, even though it is very crucial.
Medicare is one of the biggest expenses a person faces in retirement. According to a survey carried out by Fidelity Investments, a 65-year-old couple should expect to spend at least $295,000 in health care and medical expenses during their retirement.
A partner may be battling with a life-threatening ailment or need special care. This would take a chunk out of retirement savings as resources would be channeled to take care of the partner’s health.
If the person with a poor health condition is the breadwinner, this could cut short the retirement savings and plunge the partner into financial distress when the breadwinner is no longer productive due to health reasons.
How much retirement income a couple can set aside for health depends on one's age and health condition. Couples can invest in a Health Savings Account (HSA) or a long-term care insurance to supplement with Medicare aid.
One factor which retirement couples often fail to put into consideration is the impact of death on the financial security of the partner.
Death is sacrosanct. Though we always want to postpone the thought, we will inevitably experience it. As such, it does not help to put off the thought, as the death of a partner could have negative consequences for the financial condition of the other one.
This is perhaps more expedient for women than men. Because they tend to live longer than and earn lower than men, women face a more precarious situation than men in the event of death.
According to a survey carried out by the University of York, widows suffer an average drop of 22% in their income in the first two years after losing a spouse. As such, when planning for retirement, it is appropriate for couples to give cognizance to their partner’s financial status in the event of death.
Money is a very sensitive issue, which leaves many loopholes for mistrust to creep in.
Even the retirement plan may be fool-proof, it may never work unless both partners trust each other. That is the foundation upon which any retirement plan would be implemented into workable ideas.
When there is trust, then couples can plan their retirement without having to peer over each other’s shoulders. Once the trust issue has been set aside, it is always easier to share and buy each other’s opinions about investing towards retirement.
Photo by Aaron Burden on Unsplash
