Retirement Planning Is a Family Affair
It’s pretty common among married couples for one spouse to take the lead as the family money manager. It’s usually the one with the most interest and/or time to spend dealing with taxes, investments, and household budgeting. Over the last several years I’ve been encountering more and more families where each spouse manages his and her own finances completely separately. This typically occurs when people marry later, after having established their own separate lives, or after remarriage. This can be problematic, though, when it comes to retirement planning. Unless the couple is expecting to divorce, a retirement plan is really a joint plan. How do two people used to managing their financial lives separately plan for a common retirement? Here are a couple of tips to consider.
- Who is that person hanging around the kitchen? If you’ve both been working, chances are you didn’t interact much at home, especially during the week. You may even have needed to schedule time together (“don’t forget about the ballet this Thursday”). Once you retire, by default you will be spending a lot more time at home. Don’t wait until you’re both sitting on the couch watching soap opera reruns on daytime TV to start figuring things out. Start working together now on a retirement plan that prioritizes what you’d both like to be doing during your retirement years.
- How will you make spending decisions in retirement? If you needed or wanted something, and had the income to support it, did you buy it without having to justify the purchase to your spouse? During retirement your household expenses will become a key factor in your joint lifestyle. If you’ve never really had to manage a joint budget, it’s easy to get into an argument when you find out how much your spouse is spending on various items. Take the time in advance to start tracking your spending and to establish ground rules for spending decision-making. Even if you don’t end up needing to budget during retirement, this will help you live together with much less strife.
- Do you have a common investment strategy? Retirement is the time of life when your investment portfolio will likely be the primary source of your income. Although you may have been comfortable taking a certain amount of risk while you were working, now that you’re relying on your investments to pay for things like food and entertainment, you may not feel quite as sanguine when markets become volatile. And your spouse may have a totally different viewpoint from yours. Now is the time to discuss a joint investment strategy that appropriately balances your joint portfolio’s targeted risk and return.
- How do you plan to support your adult children from previous marriages? If you have a blended family, you may want a certain amount of your savings to go to your biological children after you die, and the same may be true for your spouse. You may also want to provide financial support to some of your children while you’re still alive. Are there any that are financially struggling? Any prone to overspending? There are gifting and estate planning solutions that can address many situations, but they require not only advance planning but agreement on how the money should be divvied up. Come up with a plan that’s fair to everyone involved before you begin your retirement so that any such issues do not jeopardize your retirement or your marriage.
Adjusting to a jointly-managed retirement after you’ve spent many years managing your finances yourself can be a challenge. Besides all the suggestions above, remember the magic word that has probably helped you through numerous marital difficulties: “Compromise!”