Yahoo Finance 5 Reasons Couples Need to Talk About Retirement
It's not uncommon for a 50-something couple to plop down in front of their financial planner to talk about the future, only to discover that the wife's visions of a retirement beach home clash with the husband's visions of a fishing cabin in Maine. When it comes to talking about their retirement future, couples are plagued by the same obstacles that keep many people from talking about finances throughout their married life: They either don't get around to it or it's too uncomfortable a subject to broach.
"I have met with people getting ready to retire when they have not had a conversation with each other on what the future looks like," says Mitchell Katz, a financial planner for Capital Associates Wealth Management in Bethesda, Maryland. "Sometimes they have talked about what the future looks like and may not agree, or they don't understand the numbers. I joke that I am half financial advisor and half marriage counselor."
Here are some key topics to discuss for a smooth transition into retirement:
[Read: A Couple's Guide to Retirement Planning.]
Budget. Before you retire, you need to have a serious conversation with your spouse about how much your retirement income sources will allow you to spend each month. "Look at your checkbook and all the transactions. When you look at 12 months of income, is that sustainable? Could you live off that?" asks Jeff Speight, a certified financial planner with Tanglewood Total Wealth Management in Houston.
Each couple needs to determine if their current lifestyle is sustainable or they need to make changes to stay within their budget and make their savings last. "Some spouses say, 'I've been working all my life. I don't want to be counting pennies during the time I'm supposed to be enjoying,'" says Eric Bailey, a certified financial planner and founder of Bailey Wealth Advisors in Silver Spring, Maryland. "Another spouse says, 'We've been doing a decent job, but I'm willing to cut back even more.'"
Lifestyle. It's not uncommon for people to live well into their 80s and 90s. As a result, some people spend more time in retirement than they did in their working careers. That means couples need to discuss how they will spend several decades of retirement. The first subject is when to retire. Often a husband and wife retire at different times, which can cause friction when the retired spouse wants to plan vacations and travel while a working spouse has less flexibility. Retirement also necessitates renegotiating your division of labor. Consider a former high-ranking executive who retired after 40 years and drove his stay-at-home wife crazy when he started interfering in the household, even telling her how to maintain a garden she had kept for years. Couples need to decide how much time they will spend together and separately outside of the house.
[Read: 10 Tips to Help Your Marriage Survive Retirement.]
Stay or move. Couples may have different ideas about where to live after retirement. One partner may have visions of retirement in Arizona, while the other wants to stay and retire in place, so they can stay close to the children and grandchildren. "One spouse wants a home in a warm climate like Florida, and the other is not interested," Katz says. "They are a couple of years away from retirement and have different views of what retirement looks like." It may require some compromise to find a location that is agreeable to both partners.
Even if you plan to stay put, you also have to make decisions about whether or not to downsize. "If we stay in the local geographic area, do we stay in the house or sell the house?" Bailey asks. "If I stay in the house I'm in, should I do improvements before we get to retirement?" Adding age-friendly features to your home can make it possible to stay in your home longer.
Social Security. Decisions must be made about when each spouse will apply for benefits. "Should we take Social Security of 65 or 66, or push it to 70?" Bailey asks. "One spouse may think you're going to turn that on, and another thinks they will wait." Married couples may be able to boost their Social Security income if they coordinate when they claim Social Security. In some cases it makes sense for the lower earner to claim benefits early while the higher earner delays claiming to earn delayed retirement credits and maximize potential survivor's payments. However, the best claiming decision ultimately depends on how long you will live. "You have to build in mortality issues," Bailey says. "Some [people] have a good family history of living a long time." Making the wrong decision can cost a couple hundreds of thousands of dollars over their lifetimes.
[See: 10 Ways to Increase Your Social Security Payments.]
Retirement risks. In even the best planned retirement, things can go wrong. Retirees need to talk about what will happen when issues arise and how much risk they are willing to accept. Bailey says couples should discuss the rate of return and risk levels of the retirement portfolio and health care issues. Taxes and inflation can also have a tremendous impact on your retirement savings. Speight says even when couples have a retirement budget they are comfortable with, they usually have not accounted for things like travel, buying a new car or emergency home repairs.
It might take several conversations and some additional research in order to reach an agreement with your spouse, and many people consult financial advisors for an expert opinion. Katz usually starts by asking a couple for the five things that are most important to each spouse. "Once, as a third party, we begin the dialogue; they find that they are not that far apart," Katz says. "It will involve compromise."
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