Contributed by: Matt Trujillo, CFP®
Retirement and Longevity
Many couples don't agree on when, where, or how they'll spend their golden years.
When Fidelity Investments asked couples how much they need to have saved to maintain their current lifestyle in retirement, 52% said they didn't know. Over half the survey respondents – 51% – disagreed on the amount needed to retire, and 48% had differing answers when asked about their planned retirement age.*
In some ways, that's not surprising – many couples disagree on financial and lifestyle matters long before they've stopped working. However, adjustments can become more complicated in retirement when you've generally stopped accumulating wealth and have to focus more on controlling expenses and dealing with unexpected events.
Ultimately, the time to talk about and resolve any differences you have about retirement is well before you need to. Let's look at some key areas where couples need to find common ground.
When and Where
Partners often have different time frames for their retirements, an issue that can be exacerbated if they are significantly older. Sometimes, differing time frames are due to policies or expectations in their respective workplaces; sometimes, it's a matter of how long each one wants – or can physically continue – to work.
The retirement nest egg is also a factor here. If you're planning to downsize or move to a warmer location or nearer your children, that will also affect your timeline. There's no numerical answer (65 as a retirement age just isn't relevant in today's world), and this may be a moving target anyway. But you both need to have a general idea on when each is going to retire.
You also need to agree on where you're going to live because a mistake on this point can be very expensive to fix. If one of you is set on a certain location, try to take a long vacation (or several) there together and discuss how you each feel about living there permanently.
Your Lifestyle in Retirement
Some people see retirement as a time to do very little; others see it as the time to do everything they couldn't do while working. While these are individual choices, they'll affect both of you as well as your joint financial planning. After all, if there's a trip to Europe in your future, there's also a hefty expense in your future.
While you may not be able to (or want to) pin everything down precisely, partners should be in general agreement on how they're going to live in retirement and what that lifestyle will cost. You need to arrive at that expense estimate long before retirement while you still have time to make any changes required to reach that financial target.
Your Current Lifestyle
How much you spend and save now plays a significant role in determining how much you can accumulate and, therefore, how much you can spend in retirement. A key question: What tradeoffs (working longer, saving more, delaying Social Security) are you willing to make now to increase your odds of having the retirement lifestyle you want?
Examining your current lifestyle is also a good starting point for discussing how things might change in retirement. Are there expenses that will go away? Are there new ones that will pop up? If you're planning on working part-time or turning a hobby into a little business, should you begin planning for that now?
Retirement Finances
This is a significant topic, including items such as:
Monitoring and managing expenses
How much you can withdraw from your retirement portfolio annually
What your income sources will be
How long your money has to last (be sure to add a margin of safety)
What level of risk you can jointly tolerate
How much you plan to leave to others or to charity
How much you're going to set aside for emergencies
Who's going to manage the money, and what happens if they die first
... and the list goes on. You don't want to spend your retirement years worrying about money, but not planning ahead might ensure that you will. Talk about these subjects now.
Unknowns
"Expect the unexpected" applies all the way along the journey toward retirement, but perhaps even more strongly in our later years. What will your healthcare costs be, and how much will have to come out of your pocket? Will you or your spouse need long-term care, and should you purchase insurance to cover that? What happens if the market suffers a severe downturn right after you retire?
While you obviously can't plan precisely for an unknown, talking about what might happen and how you'd respond will make things easier if the unexpected does occur. Included here is the reality that one of you will likely outlive the other, so your estate planning should be done together, and the day-to-day manager of your finances should be sure that their counterpart can take over when needed.
Communication is vital, especially when it comes to something as important as retirement. Almost all of us will have to make some tradeoffs and adjustments (as we do throughout our relationships), and it's important to remember that the earlier you discuss and negotiate what those are going to be, the better your chances of achieving the satisfying retirement you've both worked so hard to achieve.
*2021 Fidelity Investments Couples & Money Study
Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author, and not necessarily those of Raymond James.