At Keen Wealth, we encourage our married clients to participate equally in the financial planning process. One spouse might be the primary breadwinner and the other might keep up the home and raise the kids. Or both spouses may have careers but one still handles all of the financial planning. But you can’t delegate retirement. Both spouses will need to make key decisions on things like health care, residence, and lifestyle that will affect them both individually and as a couple. They’ll need to be on the same page about how short-term volatility in the markets will affect their long-term planning. They’ll need to understand how their savings and investments feed into their monthly budget and annual withdrawal rate. Agreement and mutual understanding are keys to both spouses having the life in retirement that they want.
But there’s another practical reason both spouses need to participate in retirement planning. However unpleasant it may be to contemplate, one day, one spouse will have to handle all of these responsibilities alone. In most cases, that responsibility falls to a widow, because women, on average, outlive men.
If the deceased spouse shouldered the bulk of the retirement planning, this sudden new responsibility will make a difficult time even harder. Women who are not currently the “financial spouse” in the relationship need to start thinking about these key line items that will determine how much money they’ll need for retirement.
1. Life expectancy.
According to the U.S. Department of Health and Human services, the average man lives 76.1 years, and the average woman lives 81.1 years. Even with help from Medicare, out-of-pocket health care expenses tend to increase as we age, especially if you’re managing any ongoing conditions that require prescription drugs. Remember, Medicare covers individuals, not families. When transitioning from employer-subsidized health care, couples should work with a professional to find plans that cover both spouse’s unique needs. Also, get in the habit of checking in with that pro every year to discuss any changes to the health care marketplace that you might want to take advantage of.
2. Savings, investments, and debt.
There’s no one-size-fits-all answer to how much you should be saving and investing. “Save more than you spend” is a pretty good start though. If you don’t currently budget, getting in the habit will be a big help in retirement. At the very least, you should have a handle on where you and your spouse’s paychecks are going every month: what kinds of accounts you’re depositing into, how much you’re depositing, and how those accounts are expected to grow over time. Also figure out how long it’s going to take you to pay down any debts that are racking up interest charges, specifically any credit cards holding a high balance. Some couples might want to factor paying off a mortgage into this equation, but as long as that mortgage isn’t adjustable it might be best to keep paying over time, even in retirement.
It’s difficult to think about life without a loved one, especially a spouse you’ve shared so much with. But as retirement nears, couples need to have a difficult conversation about what life will be like for the surviving spouse. Do you want to live by yourself in your current home? Will you be able to do so without extra help? Will you need all that extra space? Would it be more practical to move somewhere smaller? Or closer to family and friends who will make this next phase of your life a little less lonely? Maybe a retirement community that will allow you meet new people and enjoy your hobbies?
4. Sources of retirement income.
A common misconception we see from women who are less involved in retirement planning is that they’ll just be able to “live off Social Security.” And while Social Security is a very important benefit, it’s not sufficient to cover living expenses for most folks. In a good portion of the cases, we encourage clients to make budgets that allow them to live comfortably without taking Social Security for as long as possible and maximize the size of the benefit. Delaying Social Security also maximizes the survivor’s benefit that a living spouse will receive.
In addition to Social Security, make sure you understand what kinds of financial accounts make up your retirement nest egg. This includes savings accounts, retirement accounts like 401(k)s and IRAs, investment accounts, life insurance plans, and pensions. If your spouse has any accounts or benefit plans that are only in their name, make sure that you and any children are listed as beneficiaries – and vice-versa if you are the primary working spouse.
Finally, don’t forget about what we’re discussing here: income. That means you’re going to have to pay taxes on withdrawals from some or all of these accounts.
Now, start going to the meetings.
A common reason that the spouse who’s better-versed in finance tends to handle the retirement planning alone is that the other spouse finds all of these items overwhelming.
Unfortunately, your finances are going to feel even more overwhelming if you’re playing catch-up while also trying to settle your spouse’s estate and adjust to life during a difficult time.
I know it sounds like I’ve been generalizing a little in this post, but our experience at Keen Wealth is that this unfortunate circumstance falls to widows much more often than widowers. We are grateful to report that the majority of our clients at Keen Wealth are already taking our advice on this. But if you’d like to get even more involved in your family’s financial planning, or are not a client of the firm, we are here to provide as much planning and education as you need and desire. We’re happy to answer any questions and get both spouses up to speed so that you feel secure about your retirement.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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