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Start retirement planning as early as possible with your spouse

Two heads are better than one, especially when tackling an important, life altering situation such as retirement. When spouses or partners are both approaching retirement together, planning requires that both parties are involved in the decision making process, and that both parties have common values and goals.

The starting point is always the hardest. Creating a roadmap towards retirement will make the journey easier. The journey is lifelong and will take plenty of twists and turns before and after retirement. But because we have laid out the roadmap, we can get back on track with minor adjustments. 

The roadmap is your retirement plan. The journey could be 10, 15, 20, or 30+ years away. The stops along the way are the items/projects that need to be completed. Rest stations are meeting with professionals to make sure the plan is still achievable. Follow this advice to make your retirement planning roadmap with your spouse.


Do

Do communicate goals together

It’s fun to dream. Dream of your life together in some far away place, sipping cool drinks, and not worrying about anything. Now, wake up, because for the majority, that’s all that it is—a dream. Over the early years, couples should discuss retirement and share ideas of what they want it to be like. But nothing will happen until you both set a real, feasible retirement plan in motion.

Develop a retirement plan and, at the very least, have it reviewed by an expert. This retirement planning expert can help you determine if and how this plan will help you reach your retirement goals. And keep in mind that plans can’t be written in stone. They need to be adjusted many times in a lifetime depending on changing circumstances—personally, financially, and economically. 

Do keep saving for retirement

Once a couple has their vision for retirement and know what is needed financially to achieve their goal, it is easier for both to save. Saving can take a number of forms from a traditional IRA or Roth IRA, to tax-deferred plans through your employer such as a 401(k). Contribute as much as possible. Some contributions may reduce federal income taxes, and some might be subject to income limits. Consult an accountant or advisor to optimize your retirement savings plan and subsequent tax liabilities.

Do prepare and organize your estate plan long before retirement

Besides savings and investments to guarantee an income for your retirement together, decisions need to be made during this time regarding your estate since retirement income and assets become part of an estate.

It’s critical that you and your spouse title your assets like homes or land, and name beneficiaries to investments such as life insurance, IRAs, 401(k)s, 403(b)s, etc., to make sure that assets are left to agreed individuals, charities, or trusts. Wills, living wills, health directives, and power of attorneys are important documents of an estate plan, but titling and naming beneficiaries will guarantee your assets go to the right people.

Meaningful communication and joint decision-making in these areas will give you both more control over your hard earned assets, reduce your anxiety, and minimize any potential squabbling among beneficiaries. Again, these need to be reviewed periodically as circumstances change. It will allow more time for concentrate on other aspects of retirement. 

Do prepare your home and living arrangements as you approach retirement

Where do you want to live during retirement? Stay in your current home, or downsize? Is it affordable to stay in your home with a reduced or fixed income? Perhaps it makes sense to move closer to grandkids to help with babysitting? Or move to a lower taxed state?

As you can see, this is a very complicated decision with many variables. If considering selling, watch the housing market and sell when market is on the upswing. Make repairs; finally get to that painting you keep talking about; start getting rid of things you don’t want or need any longer—all in anticipation of putting it on the market. But keep in mind that over-improving or -repairing may not recover the costs. Regardless of the specifics in your retirement goals, the objective is to be settled when retired.

Do talk about what you might do during retirement

How will all that time be spent once you’re retired? Was freetime part of the plan? Do you have any hobbies you’ve always wanted to try? Social events, clubs, organizations, or volunteering are other ways to spend your time and get involved in your community. It’s important to remember that once you’re retired, there is still a fundamental need to stay active and meet other people in order to keep both mentally and physically healthy.

Have you considered a part-time job? It sounds counterintuitive, but this might be good for a number of reasons. It is a way of interacting with others, keeping to a schedule, and providing some income. Looking at the income aspect, any money you earn can pay for basics, spending money, or vacations. A major advantage is that these expenses are not taken out of savings.

Some people find themselves in early retirement and need income before the usual retirement age of 66. They have to make the decision of taking Social Security early. If taken early (62), be prepared to receive about 25% less. If it is absolutely needed, no problem—take it at 62. However, a part-time job would help you defer Social Security, or early distributions from other investments. 


Don't

Do not wait until the last few years to plan

Planning is important. People plan far in advance for weddings, graduations, and vacations, so why not plan for retirement as early as possible? Time and compounding interest will be the best of friends. The longer planning for retirement is delayed or postponed, the more funds are needed to fund full retirement needs and the less time to recover from market corrections.

There are fewer options upon retirement if no or very little funds have been accumulated. You lose control of your golden years. Social Security alone will not go far. Social programs are available, but come with caveats attached. Do you have children that you can move in with? Not a good option? Are you forced to work to survive at or during retirement? This can be scary. Start planning and saving today.

Do not ignore the reality of death

Few people like to address death, taxes, or thoughts of the end of their working lives (retirement). Ignoring any of these will lead to your loss of financial control. You can have control over who receives your assets upon your death. The amount of taxes can be minimized by budgeting and tax planning. Thinking about, planning, and being proactive can give you options and reduce anxiety about retirement and the end of life. Even if initial results are not what you had in mind, take active measures to offset more negative outcomes for the future.

Do not depend on just one asset

The old adage, ‘Don’t put all your eggs in one basket,’ applies to your retirement assets. Why gamble your retirement on just one type of asset? Would you only eat one type of food? Of course not. Diversify and spread the risk. Some say they do not have enough money to spread among different investments. You won’t know until you analyze what you have, and you might be pleasantly surprised.

Speak with an investment advisor to analyze the investments you have. Is all your money tied up in your home? Only have stocks? Bonds? Mutual funds? Annuities? A mix of these assets is optimal. This is where a professional is needed to allocate assets to various categories depending on your risk tolerance. Make interest rate and inflation rate assumptions that can yield maximum retirement funds. Too high interest rate or too low inflation rate assumptions can produce a rosy, but unrealistic picture. Do if-then scenarios using various interest and inflation rates.

Do not rely on rumors and recommendations

A lot of misinformation can cloud judgement and lead to erroneous conclusions and results. Family and friends mean well as they share their experiences, but it’s all from their own vantage points and financial situations. They may refer accountants, attorneys, and financial advisors according to their personal styles. Listen to them, of course, but make your own decisions in the end. Interview professionals not only for credentials and experience, but for personality as well. See if you connect and relate well with the expert since they could very easily be your financial advisor for decades.

An important question to ask is if you can call on them with simple questions without being on the timeclock. Let them know you are looking for a long term professional relationship, and don’t agree on any sort of nickel and dime relationship with them. Remember that you are employing them—not the other way around. 


Summary
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Retirement planning can be complex. It is always prudent that when we have a complex problem to solve, we break it up into smaller parts. Retirement is a prime example. One way is to use a timeline approach: early planning, decisions before retiring, and decisions at retirement. These can be broken down even further into projects. One spouse might have certain skills or talents that the other one doesn’t. Work together and plan effectively for a successful and joyful retirement.


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Brenda Hendrickson CSACEO

Brenda Hendrickson, CSA has been in the accounting and tax field for over twenty years and is owner of an accounting and tax firm, Brenda Hendrickson CSA, LLC, in New Jersey. She started her career as a full charge bookkeeper, an accounting man...

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