If you’ve been thinking about retirement, you’ve probably been focusing on three main considerations:
1. What age you’d like to retire;
2. What you want to do in retirement; and
3. If you’ll actually have enough money to accomplish items 1 and 2.
And that’s a great start. Those are all important things to be pondering as you make your retirement plans.
But I’m sometimes amazed by how few couples seem to talk about those topics. They’ll have conversations about their grandkids, their next big vacation and what needs to be done around the house. But they don’t seem to get down to the specifics of what their individual retirement dreams are and how they could mesh those ideas into one plan so the transition goes smoothly for both of them.
How bad is the disconnect? When Fidelity Investments did its most recent “Couples Retirement Study” in 2015, the majority of the couples they polled (72%) said they communicate exceptionally or very well. And 90% said starting a conversation about topics such as household budgets, savings, investments, wills and estate planning isn’t difficult. But half disagreed on their exact retirement age, and nearly half (48%) said they had “no idea” how much they would need to maintain their current lifestyle in retirement.
So how can you get on the same page with your spouse about your retirement plans? Why not put on some music, settle into your comfiest chairs and start a conversation by asking each other:
1. What age do you plan to retire?
When I started in the financial advisory business 20 years ago, most couples I worked with were around the same age. Now it’s not uncommon for one spouse to be five to 10 years younger or more. And their ideas about when they want to retire can be very different. I had a couple in recently who were far apart in age — and on this decision. He was older and had a retirement date set in his mind, and it was coming up fast. She kept finding one excuse then another for putting it off. It turned out she was worried that as soon as he retired he was going to want to start going and doing — and she would be stuck working. It wasn’t about money. She just wanted him to wait for her, even though he was ready to put in his notice any day.
2. What do you want retirement to look like?
We all have different dreams about what we want to do in retirement, and you don’t necessarily have to do everything with your spouse. But you should have an idea of what each person wants and how those goals can align. Will one partner start every day with a golf game while the other heads off to work? Will you sometimes travel alone or with friends? Do you want to do missionary work or volunteer? Be clear about what your expectations will be for the time you’ll spend together and apart.
3. How much money will you need to meet your retirement goals?
If you’re getting close to retirement, you should be able to put together a projected budget that includes your everyday expenses as well as the costs for some of the “extras” you hope to have: a dream trip to Europe, perhaps, or a vacation home or a boat. I’m always surprised by how few couples are working from a budget — even those who have been diligent savers. When I ask them to supply those numbers, they’re at a loss. But we can’t determine how much you’ll need and where it will come from if we don’t know how much you expect to spend. This is where it’s important to work with a financial professional who can make sure the plan is on target for both spouses.
4. What will happen to your income plan if one of you passes away?
This is a topic few couples want to talk about, but it’s a must. You should be prepared to talk to your adviser about how your pension payments, Social Security benefits and other income streams may be affected by the loss of one partner — and what tools you might use to replenish that income so the surviving spouse has enough money to remain comfortable. And you should discuss your strategies in terms of two separate scenarios, because there’s simply no predicting which spouse will die first.
5. How do you feel about market risk?
Another factor we can’t predict is what the market will do once you’re in retirement. The typical plan has a solid, safe foundation that includes your pension, Social Security and maybe an annuity check. But most couples also will be pulling from an investment portfolio, and that means having a conversation about the level of risk you’re both comfortable with and finding a compromise. Fortunately, we have new tools to help people with that. We use Riskalyze, which allows a couple to sit down at home and work their way through a few questions that will help them understand their feelings about risk. Every time you answer a question, the program will show what the consequences of that decision would be. It doesn’t just label you as a conservative, moderate or aggressive investor; it will show you a dollar amount and how that loss will affect you. Together, hopefully, you and your spouse can find a happy medium for your level of investment risk.
There’s nothing wrong with having some strong ideas about what you want your retirement to look like. You and your spouse will always have your own priorities. But why not talk them through now rather than waiting for an argument or some life event to push those decisions on you?
Once you make your way through all these topics, you’ll have a better opportunity to create a shared vision for your future.