As a financial planner in Utah for many years, it’s still surprising how many times we see couples on different pages when it comes to retirement and how to spend their Golden Years. This can pose several problems.
First of all, how do you plan for something if you’re not sure what that something is? If one spouse dreams of starting a new business in retirement, and the other expects them to travel the world, how do plan for expenses? How do you determine how much you need? How much should you be saving? Will you have start-up costs, or airfare and room expenses?
Secondly, do you and your spouse even plan to retire at the same time? If not, is the spouse who will retire early prepared to do things without their partner?
And wildly, do you even plan to spend your Golden Years in the same location? You don’t want to be surprised when it’s time to retire that your spouse expected to sell your home, downsize and move closer to family when you had anticipated the opposite, spending your newfound free time renovating your dream home.
These may sound like very basic questions, but many times we see spouses make assumptions that they’re on the same page when, in fact, they are not. Having the same plans isn’t necessary, but knowing how your spouse plans to spend retirement, which, as people live longer, can realistically stretch 20 or 30 years, is crucial.
Having a real conversation about retirement and what that looks like is vital! If you’re not sure how to get the discussion started, or if you already know that your plans differ from your spouse’s, ask your financial planner to join the discussion. In our experience at Rock House Financial, we’ve often been able to suggest strategies that allow both partners to accomplish their goals.
If you haven’t had the retirement conversation with your spouse yet, start by answering the following 4 questions.
It’s never too soon to start planning for the future. Schedule a no-obligation conversation with the Rock House Financial team.
What Does Retirement Look Like to You?
Spend some time discussing what an ideal retirement looks like to you. Do you want to travel? Run a business? Pursue hobbies close to home? Visit grandchildren?
Will you remain in your current location or plan to move to another area? Will you downsize to save on the upkeep and maintenance of a home?
Once you’ve jointly discussed your ideal retirement, you can review your ideas and create an actual plan.
When Do You Want to Retire?
While many people still assume that retirement age for everyone is 65 or 66, that’s not the case, especially these days. Many people choose to retire early, and yet another growing phenomenon is people continuing to work into their 70s and even 80s.
Do you and your spouse want to retire at the same time? If not, what does a staggered approach look like? Would a difference cause any issues between you and the rest of your family psychologically, emotionally or financially?
The “when” to retirement also has a bearing on your retirement nest egg.
First, the amount of Social Security benefits one receives can vary widely depending on when you take them. If you begin taking benefits between the age of 62 and your full retirement age, benefits are permanently reduced, and the decrease can be as much as 30 percent. (The Social Security Administration determines your full retirement age by birth year.) Conversely, if you wait until after your full retirement age, the amount you receive increases roughly 8 percent per year permanently, up to the age of 70.
In other words, if your Social Security benefits equal $2,000 per month at your full retirement age, they can drop to $1,400 per month if you take them at age 62 ($2,000 – 30 percent = $1,400). But if your full retirement age is 66 and you wait to start claiming your benefits until age 70, you can receive closer to $2,520. The swing between $1,400 and $2,520 each month can add up considerably in retirement, even if Social Security only makes up a small amount of your retirement income.
For other age-related milestones to watch out for, read our recent blog post: Retirement Checkpoints: Age Milestones You Don’t Want to Forget.
Retiring at different times can also affect your retirement contributions. If you retire early, for example, is your plan based off you receiving your employer match to your 401(k) for longer? Talk to a financial planner and explore multiple scenarios.
What Are Your Financial Goals?
While similar, your financial goals are different than your plans for retirement. You and your spouse may be on the same page about relocating to Utah, for example, but did you both plan to support your aging parents in retirement?
As a financial planner in Utah, no two retirements are exactly the same. Financial goals can vary widely in retirement, even between spouses. Do you and your spouse want to leave money for your children, pay for your grandchildren’s college tuition or help the next generation purchase their first home?
Each spouse should discuss their own financial goals. If different, discuss which goals are joint and which might be separate. Talk with a financial planner to create a path toward goal achievement and avoid surprises later on.
What is Your Biggest Worry?
It’s only natural to have some worries about your future, especially when it comes to your finances and the possibility of outliving your money. But spouses can have far different concerns. Do you fear you’ll run out of money or are you afraid you won’t spend what you’ve worked so hard to save?
As a financial planner in Utah, here are some common worries retirees face, either together or on their own:
- Healthcare costs
- Becoming a burden to children or grandchildren
- Financial setbacks due to drops in the stock market
- High rates of inflation, which can erode the purchasing power of your assets
- Estate planning, such as wills and trusts and their effect on family and friends
- Long-term care
At Rock House Financial, our team of financial planners in Utah can help you examine your retirement plans on your own and as a couple, including goals, finances, healthcare and estate plans. Schedule a no-obligation conversation today and get the discussion started.