We all know—or at least, we should—that a good marriage revolves around the art of compromise. This is certainly true when it comes to financial matters, and one of the most important financial matters for spouses approaching retirement age is agreement on a strategy for retirement. This is a topic that should not be left to chance; it is vital for couples to have a clear, mutually agreeable understanding of their plan for the retirement years.
Several key matters should be openly discussed and agreed upon before either spouse retires. These include:
- Deciding at what age to retire. Especially when the spouses are of different ages, they should agree on the schedule for who retires when. Will the oldest spouse work until age 70 to maximize Social Security benefits? Will the younger spouse continue to work until full retirement age or retire early in coordination with the older spouse’s retirement? How will these decisions affect the couple’s overall retirement income? These are important considerations that need thorough consideration.
- Evaluating current or potential health issues that might alter retirement plans. Suppose a partner who was planning to work until age 70 to maximize Social Security benefits suddenly develops a serious health issue that could require her to retire earlier than intended. How will the couple make up the difference in retirement income? Are there employer health benefits that could make it worthwhile to delay retirement? How will they address the health concerns without threatening their wellbeing in retirement? Is the issue serious enough that they should consider altering their lifestyle assumptions?
- Keeping the house, downsizing, or moving. Any decision on changing your address in retirement requires careful consideration of expense, income, and tax implications. Make sure you’ve talked about it and agreed on a plan—or the parameters by which you’ll make the final call—before you’ve left the workforce.
- Best strategies for drawing down assets. Many couples spend decades carefully building their investment portfolios to provide for their retirement years, but they give little thought to the best way to utilize those assets when the time comes for funding their retirement income needs. A certified professional planner can provide important assistance in helping you devise a plan that makes the best and most tax-efficient use of the assets you have gathered. But both spouses need to understand the plan in order for it to work with maximum efficiency.
These are just a few of the decisions that couples typically face in retirement. The sooner you have an open, thoughtful discussion of your intentions, assumptions, goals, and hopes regarding your retirement lifestyle, the better able you’ll be to make decisions on these matters that reflect the priorities of both spouses. Not only that, but getting everything out in the open makes for much less stress, and that is a big positive for any relationship!
Stay Diversified, Stay Your Course!