Ready for
retirement? Not so fast. You might be surprised at some of the issues that come
up for couples when they plan.
Miranda Marquit • September 6, 2019
AddThis Sharing Buttons
Share to FacebookShare to
TwitterShare to EmailShare to Pinterest
As a
single person, when you make financial decisions, it’s all about what works for
you. When you’re in a long-term relationship, though, that changes.
Couples,
even if they keep aspects of their finances separate, still need to pay
attention to ways to manage retirement planning together.
If you
want to have a successful retirement as a couple, start taking steps now.
1.
Communicate
One of
the first things you need to do as a couple is to communicate about your
retirement plans, goals and needs.
According
to Fidelity’s 2018 Couples & Money Study,
more than half of couples disagree about how much money to save for retirement
and about 2 in 5 disagree about when their partner should retire.
These
are issues that can derail retirement plans if not addressed — especially
if you don’t get on the same page about how much to save in the first place.
The
first step to making sure you have truly golden years is to talk with your
partner and figure out how to approach things together.
2.
Take advantage of spousal IRAs
Take
advantage of the ability to contribute to a stay-at-home spouse’s IRA to
increase your overall tax efficiency as a couple.
If
either you or your spouse will stay home or work part-time, the major earner
can contribute to an IRA (individual retirement account) in the name of the
stay-at-home spouse.
One of
the perks of IRAs is that a working spouse can make contributions to the
other’s IRA — regardless of earnings.
As MoneyTalksNews writer Maryalene LaPonsie explains,
“Married couples who file a joint tax return can contribute to an IRA for each spouse even if
only one person works, assuming they are otherwise eligible to contribute to an
IRA.”
3.
Two-income households should save more
A recent study from the Center for Retirement
Research at Boston College finds that two-income households aren’t saving any
more for retirement than other savers. According to the research, in many
dual-earning households, only one person has a 401(k).
The
result, according to the research, is that dual-earning households with only
one saver may be saving less of their household income than they should be.
Don’t
assume that just because one of you is socking away money through work, that’s
enough. If only one of you has access to an employer’s plan, review your
household budget and consider making bigger contributions to the
401(k) to reach your goals.
4.
Review your beneficiaries
As you
plan for retirement and approach retirement, it’s important to review your beneficiary selections.
No
matter what’s in your will, naming beneficiaries who will receive benefits from
retirement and bank accounts and insurance policies is critical to ensuring
that your wishes are carried out after your death.
It’s
especially important to review beneficiaries if you or your partner has been in
a previous relationship. You may not want your IRA savings to be passed to your
ex after you die.
Checking
your beneficiary designations makes certain that they match your preferences.
5.
Consider retiring at different times
While
it might seem natural for both of you to retire at the same time, it may make
more sense, depending on your situation, to retire at different times.
If one
of you is in peak earning years, being able to earn for a few more years can
make a big difference in the size of Social Security benefits later. As a
result, you could miss out on money by retiring earlier.
Another
consideration is whether you’re both eligible for Medicare. If one of you is
eligible for Medicare and the other is not, the younger spouse might be smart
to hang on to a job for health care benefits until eligible for Medicare.
This
can cause some challenges, with one spouse retired and the other working, but
good communication and a plan can help you figure it out.
6.
Make informed — and joint — decisions about when to claim Social Security
One of
the thorniest decisions to make about retirement is when to claim Social
Security.
This is
true whether you’re part of a couple or not. However, the matter is more
complicated for couples. If you’re married, your spouse’s timing in claiming Social Security
can affect the amount of your survivor benefits.
Additionally,
how much you get as a couple depends on whether and when you choose to take
your own benefits or spousal benefits.
Before
you proceed, take a step back and consult with a knowledgeable professional, or
at least obtain an inexpensive personalized analysis of
your claiming options from a specialized company. Knowing how to get the most
benefit from Social Security can help you find the best approach for claiming
benefits.
7.
Pay attention to taxes
Couples
need to think about how their joint earnings are handled by the IRS during
their earning years as well as in retirement.
Depending
on your situation, it’s possible that you might owe a “marriage penalty” on your tax bill. It’s not
an actual penalty. But sometimes a married couple can end up owing more taxes
together than if each were single — while some couples can owe less, a
so-called “marriage bonus.” The nonprofit Tax Foundation, analyzing marriage
penalties and bonuses for 2018, says bonuses could be as high as 21% of a
couple’s income, and penalties ranged up to 12%.
You’ll
also need to pay attention to RMDs, or required minimum
distributions. These are the withdrawals that retirees must take from
tax-deferred savings accounts after age 70½. RMDs have the potential to
increase your income, affecting how much tax you owe.
Even if
your 70th birthday is far away, planning now can save you money.
A good
plan considers how you will handle withdrawals from all of your accounts, how
those will coordinate with Social Security benefits and what the tax
implications will be.
8.
Understand the implications of a divorce
If
you’re happily married, you probably don’t want to think about what happens to
your retirement assets in the event of a divorce. While no one plans for a
divorce, the reality is, it can happen.
Depending
on a number of factors, you might be subject to a QDRO (Qualified Domestic Relations Order) giving
your ex-partner rights to a portion of your retirement account. In that case,
you might be required to turn over a portion of your retirement savings during
a divorce.
The
terms of a QDRO depend on state law and other factors, but it’s important to be
aware of the possibility as you plan for your future.
Learn
everything you need to plan your dream retirement
The Only Retirement Guide You'll Ever Need
gives you the knowledge you need to retire on your own terms. Sure, you can pay
a financial adviser, but this online course gives you total control to create a
custom retirement plan around the things that make you happy.
You're
going to get expert, personalized advice. You'll have access to the latest
tools. And when it's complete, you'll be able to approach your retirement
confidently and with peace of mind.
It's
time to plan the best years of your life. Let's get started.
No comments:
Post a Comment