Planning for retirement can be challenging enough as an individual, but when saving as a couple, it gets exponentially more complicated. My husband John and I struggled for years trying to align our retirement visions and strategies.
We had diverging ideas on our ideal retirement lifestyle, dueling financial baggage from past relationships, and clashing risk tolerances for investing. It led to many tense money conversations (and arguments!). However, we’re finally on the same page after learning critical strategies for retirement saving as a team.
The key is open communication, tactical financial planning, and protecting your shared nest egg over the long-haul. I want to provide guidance so other couples can dodge the pitfalls John and I encountered. With some effort and honesty, retirement can be a bonding experience that brings you closer together!
Setting the Groundwork
Before executing complex investment maneuvers or getting lost in calculations, couples need to set the groundwork with some big picture conversations and assessments.
1. Shared Vision:
You and your partner should start by defining your shared vision for retirement. This requires some vulnerability and comparing potentially different dreams about your ideal next chapter. What does your lifestyle look like day-to-day? Where do you hope to live? How much travel is realistic?
Do either of you plan to continue working or launch a second career? Make sure to dig into the specifics so you’re planning towards the same goal. John was fixated on retiring at 55 and sailing around the world, while I wanted to consult part-time and have a winter home near our grandkids. We had to talk through these different expectations before creating an actionable plan.
2. Honest Financial Assessment:
The next essential step is a transparent assessment of your current financial situation—income, assets, debts, and all. A thorough accounting removes surprises down the road and gives you both a stake in the plan.
Tally up account balances, credit scores, monthly cash flow, and any outstanding loans or financial obligations. If needed, use free online retirement calculators to plug in details and get an unbiased snapshot of where you stand.
We had been avoiding these conversations for years and had outdated assumptions about each other’s finances. The calculators were a wake-up call that we were drastically off-track for our hoped-for early retirement timeline.
3. Communication is Key:
Regular open communication is crucial when saving as a couple. I recommend scheduling monthly or quarterly “money dates” where retirement is the sole focus.
Make these low-pressure check-ins over coffee or wine, not sitting around the computer. Set some guidelines like giving each other the benefit of doubt and avoiding finger pointing. Listen first, then strategize together.
These money talks have brought John and me closer together even when the topic is stressful. We’ve built trust and rallied around the same financial goals.
Practical Saving Strategies
Once your shared retirement vision is defined and you have an accurate picture of your finances, it’s time to develop saving and investing strategies tailored to your situation.
1. Maximize Employer Matches
I always encourage couples to start by maxing out contributions to employer-sponsored plans like 401(k)s or 403(b)s. Take full advantage of any employer match offered—this is free money you don’t want to squander!
If your employer offers Roth and traditional savings options, consider diversifying contributions between the two vehicles. The tax savings now from traditional deferrals can be hugely beneficial. But filling up Roth space while you’re at lower income levels can give you more tax flexibility later.
2. Catch-up Contributions:
Many couples get so focused on their workplace benefits that they neglect a powerful retirement perk once they turn 50. Over-50 catch-up contributions allow older savers to stash away even more in 401(k)s and IRAs above the standard limits.
In 2023, the over-50 bonus allowance is $7,500 for most plans. John and I have these auto-deposits scheduled to max these out every year. It’s an effortless way to add tens of thousands more to your eventual retirement pie.
3. The Power of Compound Interest:
I also emphasize the incredible power of compound interest for couples saving over their careers. While you may balk at only afford to sock away a couple hundred bucks monthly in your 20s and 30s after other expenses, that money can snowball into huge sums later.
Even $200 invested monthly over 30 years could grow to over $450k with average market returns. The more time you give your money to compound, the greater the eventual payoff!
4. Beyond Traditional Accounts:
Besides traditional 401(k)s and IRAs, younger couples shouldn’t neglect other tax-advantaged tools early on like health savings accounts (HSAs), Roth IRAs, and newer options like college savings 529 plans.
These all give your retirement funds more fuel to compound if you have extra capacity to save beyond workplace plans. Just don’t rob your future retirement to overfund things like college. You don’t want to end up cash-strapped later!
Addressing Special Circumstances
While many standard saving strategies apply universally, couples often face special financial circumstances that require tailored solutions.
1. Different Incomes:
For John and I, the biggest complicating factor was a large income gap. After staying home with our kids, I reentered the workforce at a much lower salary than him. This made proportional contribution match what I could afford. My smaller 401(k) deposits still counted towards the household bottom line. We also utilized spousal IRAs funded by John to help me catch up.
2. Age Gaps:
For couples with big age gaps, differing retirement timelines can also pose challenges. The older partner may have fewer prime savings years left while the younger spouse has over a decade before hitting their stride. In this case, aggressively prioritize any catch-up contributions for the older partner.
Also be strategic about claiming Social Security benefits at different times to maximize total household income in retirement. Tools like online calculators can help optimize those claiming decisions.
3. Second Marriages/Blended Families:
Blended families with past divorces, child support obligations, or new stepkids in the picture have another layer of complexity. Kids’ college costs, existing spousal support agreements, and carrying multiple insurance policies can strain retirement savings potential. These families have less margin for error.
Work with a financial planner used to managing complicated family dynamics. Be realistic about goals and strategic in finding savings opportunities suited to your unique obligations.
Retirement Planning Technology
With so many moving parts, I believe technology can empower couples gaining control of their retirement outlook. Online tools help you breeze past frustrating math barriers.
1. Demystifying Robo-Advisors:
John and I found retirement calculators invaluable for quick savings checkups. The 30-minute Projected Retirement Shortfall Calculator on Schwab’s site only requires basic details like income, spending needs, and current savings.
It then tells you whether you’re on track or how much extra you need to stash away yearly. I could adjust variables to see saving threshold impacts in real-time.
2. Online Calculators:
Other calculators help optimize claiming strategies for spousal Social Security benefits. It’s ideal for one higher-earning spouse to delay benefits as long as possible while the other claims earlier if cash flow allows. Estimators like T. Rowe Price’s tool illustrate hundreds of scenarios to maximize this lifetime income source.
3. Budgeting Apps:
For hands-off investing, robo-advisors like Betterment and Wealthfront automate portfolio rebalancing, asset allocation, and dividend reinvesting so you don’t have to sweat the details.
If keeping finances fully synced with a partner feels daunting, apps like Honeyfi and Zeta automatically sync all income, spending, and bills between partners’ accounts into a share dashboard. You’ll gain visibility spending patterns and cash flow at a glance.
Protecting Your Nest Egg
In addition to smart strategies for accumulating retirement savings, couples must protect themselves against risks that could derail the best-laid plans. Make safeguarding your nest egg another priority conversation.
1. Reviewing Insurance Needs:
One overlooked risk is having outdated or inadequate insurance coverage as a couple. Employer policies may not follow you into retirement or cover both partners.
Reevaluate needs like life, health, disability, and long-term care insurance. Workplace retiree health plans could leave gaps too. Medigap and Medicare Advantage choices are confusing—get educated rather than relying solely on plan A or B defaults later.
2. Protecting Against Inflation:
Protecting against inflation throughout retirement should be part of your investment strategy as well. Over a 30-year horizon, today’s dollar could lose half or more of its purchasing power.
Make sure retirement assets keep growing rather than just preserving capital. Prioritize reasonable equity exposure along with inflation-hedging assets like TIPS, I-Bonds, commodities, and real estate.
Couples aiming to retire early also must guard against sequence of returns risk where portfolio withdrawals at the wrong time can be irrecoverable.
3. Adapting as Circumstances Change:
Finally, remember that retirement planning rarely goes perfectly according to plan. Life happens—job losses, health issues, family obligations.
Couples must continually assess their trajectory and adapt as priorities or markets shift. Maybe you decide to semi-retire instead, downsize to rein in spending, or move somewhere more affordable. Financial check-ins keep you ready to adjust course.
Conclusion
Saving in tandem for the future invites stresses that can push couples’ relationships to the brink. However, retirement planning also represents an opportunity to fortify your financial foundations and commitment as a team.
By clearly defining your shared retirement vision, strategically growing savings over time, addressing unique circumstances openly, taking advantage of helpful technology, and protecting what you’ve built together, you will emerge more unified and secure. Don’t leave this critical life stage to chance. Make planning and tracking progress a regular ritual as a couple!
