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Planning for your retirement is crucial at every point of your life. But what happens after you’ve found the one you want to spend the rest of your life with? Or what if your spouse’s lack of retirement planning has finally forced you to grab the reins and get their finances in check? Only 4% of middle-income married couples who don’t have a pension and are nearing retirement are likely to have enough money to last their lifetime, according to a report released by Ernst & Young. When retirement planning for two, couples should be more strategic with their investments and savings. BlackEnterprise.com spoke with financial coach Dorethia Conner to find out how married couples and soon-to-be married couples will need to adjust when it comes to building a nest egg.
How should retirement planning, or one’s mindset toward retirement planning, change when getting married?
The couple should determine how much money they can afford to put toward retirement each, and how many accounts they can afford to have. For instance, instead of simply each having an account with their employer, they should also determine when they’ll be able to add Roth IRAs to their portfolio.
If the couple is allocating 15% of their income into a company plan, I would suggest that they split that and put 7.5% into their employer’s retirement plan and 7.5% into a Roth IRA. They can play with the percentages based on their budgets. They should each research the types of companies, industries held in their retirement accounts.
If someone is with a company that doesn’t offer retirement benefits but their spouse’s company does, how can they take advantage of this, if at all?
I would definitely not suggest both spouses contributing to one spouse’s company plan. In this scenario, the spouse without the plan would need to set up a Traditional IRA or Roth IRA.
For couples married 10 years, 20 years, or 30 years, and one spouse has not begun to save for retirement, what should be done to get the ball rolling?
This will depend on their age. Couples between the ages of 44 and 55 still have at least 15 years left where they can contribute to a retirement account. You may not end up with as much as you need but it will still be a significant amount. The key will be accelerating your progress by adding more each month to reach your goal. For couples in their 60s, one spouse will have to work longer and most of their retirement money will come from the spouse who did save.
How should the conversation around retirement planning change if a couple is planning for children? If the couple has children?
The conversation only changes if the children have a disability or will still be in school or college when they retire. In other words, will the children still be dependent on them in retirement? If the answer is yes, they will want to calculate how much it will cost them annually to care for their children on top of how they want to live in retirement. This will determine how much they will need to save annually to reach their financial goal.
Prior to getting married, what are some questions people should ask their spouses regarding retirement planning?
Find out their views on investing and how important a retirement nest egg is to that person. Depending on the answers, this may be a conversation that is brought up until both agree, and it may take some outside help or finance classes. For many, retirement seems so far off that they don’t see the point in starting now.
You should also find out if your significant other has a retirement account, and if he or she previously borrowed from an employer-based retirement account. Because that will affect their joint finances as that money has to be paid back, thus delaying how quickly they reach their joint retirement goals.