Retirement Planning for Couples

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 15, 2024

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Importance of Retirement Planning for Couples

Retirement planning for couples can be a complex process that requires careful consideration and attention to details. Both individuals need to understand their personal and joint needs, goals, and values to create a comprehensive plan for the future.

It is not simply about having the right amount of money saved. It also involves agreeing on how to spend retirement, like where to live and what lifestyle to maintain.

Retirement planning is essential to guarantee financial protection in the years ahead. Here are some of the reasons why:

Reduces Stress Levels

Financial stress and anxiety are common issues for adults, with over 70% of them worrying about finances, according to the American Psychiatric Association. Hence, starting your retirement planning today is crucial for financial stability and emotional and physical well-being.

Aligns Long-Term Career and Financial Decisions

Retirement planning provides the framework for making critical life decisions. Questions about whether to stay with your current employer, start a business, pursue a new career path later in life, or buy a vacation home can significantly impact finances.

Enhances Relationships with Family

Prioritizing retirement planning may prevent couples from having money-related conflicts. When spouses have different monetary values, accumulate too much debt, and disagree on a shared financial target, this can quickly cause disunity in a marriage.

Proper retirement planning ensures that retirees will not be a financial burden on their children in their later years. Further, a good retirement plan can help retirees be better grandparents by providing financial resources to support their grandkids.

Minimizes Taxes

No one wants to be overburdened with taxes in retirement, as it can deplete income and savings substantially. Crafting an optimal retirement plan can help reduce tax liabilities during all stages of life.

You can minimize taxes in retirement by investing in Roth accounts, living in a tax-friendly state, making strategic withdrawals, choosing tax-free investments, and investing for the long term.

Steps on Retirement Planning for Couples

Retirement planning consists of several steps, from budgeting and goal setting to selecting the appropriate retirement savings. Consider the following specific actions:

Assess the Current Financial Situation

Couples should assess their combined income, assets, debts, and liabilities. They should also determine how much has been saved, what future savings are required, and what resources are currently available to create a comprehensive plan.

It is also important to assess potential risks affecting the retirement savings plan. Such risks include long-term healthcare needs, inflation, market volatility, and lifestyle changes that could occur during retirement.

Determine Retirement Age and Desired Lifestyle

Couples must determine when to retire and what kind of lifestyle they want. This includes the cost of living in their desired area, hobbies or activities they would like to pursue, and other preferences.

It is also essential to consider the potential consequences of having different retirement timelines.

Estimate Required Retirement Income

For a more precise estimate of how to spend income in retirement, couples should consider consulting with a retirement planning expert. Besides that, it is essential to discuss any potential changes, such as job loss or deteriorating health, that could affect their future savings plan.

Understand Different Types of Retirement Accounts

The most common retirement accounts available to couples are individual retirement accounts (IRAs), 401(k), annuities, pensions, and cash balance plans. These accounts can contain different investment options tailored to each couple's risk tolerance and retirement goals.

These plans fall under two general category: defined benefit and defined contribution plans. A defined benefit plan guarantees a fixed monthly benefit upon retirement. The plan may specify this promised benefit in monetary terms, such as $100 per month at retirement.

A defined contribution plan, on the other hand, does not guarantee a specific amount of retirement benefits. In such plans, either the employee or the employer (or both) contribute to the employee's account, usually at a fixed rate.

Pay Debts

Paying off outstanding debts can significantly impact retirement savings. By eliminating debt, couples can reduce their monthly expenses and save more for retirement.

This can be achieved by making lump sum payments, refinancing or consolidating debts, or setting up a retirement plan that works within their budget.

Create a Retirement Budget

Calculate the estimated annual expenses in retirement, which include housing costs, healthcare expenses, transportation, clothing, and other living expenses. It is essential to be realistic about it and factor in potential increases due to inflation and other factors.

Consider the sources of retirement income such as investments, Social Security benefits, pension funds, and other sources of income. Once you have an accurate budget, it will be easier to determine how much money you need to save each month or year to reach your goals.

Regularly Review and Update Retirement Plan

Ensuring your retirement plan are up-to-date is essential to a financially secure future. Both

partners should review and update their retirement goals regularly. Consider any changes in finances, health, or other life events that could affect their financial situation.

Steps on Retirement Planning for Couples

Common Mistakes to Avoid in Retirement Planning for Couples

The process of retirement planning can be filled with pitfalls, and it is essential to be aware of common mistakes to avoid.

Failing to Plan Together

Both partners must be involved in retirement decisions to agree on how the money will be managed during retirement. This includes discussing budgeting, investing, insurance needs, and future income sources. Failing to plan together can lead to costly mistakes.

Underestimating the Cost of Retirement

Many people fail to consider the cost of healthcare, inflation, and lifestyle changes that come with aging. To avoid this mistake, it is important to research and estimate your projected expenses during retirement carefully.

Neglecting to Consider Social Security Benefits

A survivor benefit is a type of life insurance built into Social Security benefits for married couples. You can benefit more from the individual who makes the most income.

Unless the spouse begins receiving a retirement benefit more significant than the survivor benefit, these benefits are payable for life. Beneficiaries eligible for two types of Social Security payments receive the greater of the two amounts.

Ignoring Life Expectancy

Ignoring life expectancy when planning can lead to lack of resources during the later years of retirement. Couples should discuss their health and family history to understand their average life expectancy.

Couples must evaluate the impact of additional expenses during retirement, such as long-term care or healthcare costs, which can significantly affect the overall financial plan.

Putting Off Early Retirement Planning

Making up for lost time as you are nearing retirement becomes increasingly challenging and expensive. Couples need to start planning for retirement as early as possible. This gives them ample time to make necessary changes to their spending and savings habits.

The Bottom Line

Retirement planning for couples involves understanding personal and joint needs, goals, and values to create a comprehensive plan for the future.

Retirement planning is crucial for financial protection, reducing stress levels, aligning long-term career and financial decisions, enhancing relationships with family, and minimizing taxes.

The retirement planning process starts with assessing the current financial situation and determining desired retirement age and lifestyle. It is also important that couples understand the different retirement accounts available and how they can be used to save for retirement.

It is advisable to pay off all outstanding debts before they can then create a retirement budget.

Finally, the retirement plan must be regularly reviewed and updated to remain adjusted to their current life circumstances.

These are some common mistakes to be avoided during the retirement planning process: (1) failing to plan together, (2) understanding the cost of retirement, (3) neglecting to consider social security benefits, (4) ignoring life expectancy, (5) putting off early retirement planning.

Consider speaking to a retirement planning expert to guide your planning process.

Retirement Planning for Couples FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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