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Can (and Should) Couples Keep Their Finances Separate in Retirement?

Many married couples enjoy having financial independence throughout their working lives. Some maintain separate bank accounts for decades without a hitch. But even if keeping your finances separate has worked well up to now, things change in retirement, and what worked before might not make sense anymore. Every couple’s situation is unique, but financial arrangements in retirement may require some restructuring. 

Your retirement situation may be different from your partner’s and there are a lot of factors at play. Maybe one of you earned significantly more and thus has more put away. One partner may have received a large inheritance, while the other only has only Social Security and a modest pension to live on. And what about folks who remarry later in life or have children from a previous marriage?

If couples don’t communicate about their financial plans, wants, and needs in retirement, it opens the door for disagreements - not to mention missing out on money you could be spending on enjoying retirement. Here are a few areas to involve your significant other.

Talk Openly About Your Finances 

Be transparent and communicative with your partner about your retirement plans, even if you plan to keep things separate. Each partner should share specific numbers about their financial status, including retirement assets, expenses, and debts. 

Talk about your retirement goals, including what you’ve already planned, and have a candid conversation about whether each partner is prepared to support the other financially, should the need arise. Full disclosure is key to determining how long you can afford to pay for what. You might consider meeting with a financial advisor to help you set clear goals and figure out a plan to get there. 

Plan for Retirement Together to Save Money

Personal retirement accounts like IRAs and 401(k)s have only one owner, but you can still plan as a couple. By strategizing together, you can make individual retirement portfolios work for your mutual benefit.

Work Together to Lower Your Tax Bills

The types of income sources you have will affect your taxes and ultimately, the size of your nest egg. For example, if one of you has the majority of their nest egg in tax free accounts (such as Roth IRAs) and the other has the majority of their assets in tax deferred accounts (such as 401(k)s, pensions, etc.) it might make sense to use the tax-free accounts to pay for expenses and let the tax deferred accounts continue to grow until you are required to begin distributions

These decisions can get complicated quickly, but with the right tax diversification strategy, you could actually save thousands of dollars to meet your shared income needs. 

Coordinate Social Security Benefits  

Couples can maximize Social Security benefits by coordinating when to begin claiming. For example, let’s say you’re a dual-income couple. If the higher earner delays claiming until age 70, their monthly benefit will increase 8% for each year they delay social security after full retirement age until age 70. Meanwhile, the lower earner could begin claiming at full retirement age to provide income for the couple. 

There are a lot of nuances around coordinating social security benefits, so it’s important to understand your options and the impact it may have on you (and your spouse) benefits before filing an application. 

Plan for Health Care 

If you’re both still working, see if you can save money as a couple by doubling up on one employer plan. You can also start thinking about whether you’ll share health care costs equally in retirement, or if each partner will pay separately for their own medical costs. If one person gets sick, can and will the other help out financially? 

Health care costs can have a big impact in retirement, and weighing your options ahead of time will help reduce stress and conflict in the future. Other health care plans to consider include using an HSA to help prepare yourself for costs in retirement, and calculating your potential long-term care expenses.

Life Insurance and Beneficiaries

Many people forget to consider what would happen if their partner were to pass away. Depending on your situation, life insurance may be necessary to ensure a surviving spouse would be able to pay bills. 

Be sure to also double check the beneficiaries on your retirement accounts - did you change them over when you got married, divorced, remarried, or had children? Assuming you want your spouse to be the beneficiary, this is one way to make sure they are provided for in the event of your death. 

Consider Retirement Timing 

Age differences mean differences in financial need, but it can have an emotional impact too. Ask yourself what you will do if one person retires while another is still working. Will you still be expected to make equal contributions to the household fund at that point? Are you prepared for potential feelings of resentment when your partner’s off having fun and you’re at work - and what compromises can you make to avoid them?

Looking at the Big Picture (Overall Retirement Readiness Assessment for Couples) 

As you and your partner enter into retirement, you’ll learn a lot about yourselves, and each other. New lifestyle and travel patterns may emerge, and your habits and preferences will most certainly evolve over time. So, it pays to look at the big picture, keep an open dialog going, and remain open to creative compromises. 

Retirement planning as a couple may mean making different decisions than you might normally make alone, and adjusting to help each other out if necessary. It’s also very possible that this experience will spotlight other areas where you may have gaps that need further discussion.

At a minimum, you should each have a financial plan in place - doing so will help you feel confident about your future and allow both parties to be involved in financial decision-making. In addition, examine your shared values and find out whether you’re on the same page about:

  • Your timetable for retirement 
  • Lifestyle and where you may want to live in retirement
  • How you will spend your time in retirement
  • Plans for your estate 
  • Division of family obligations and responsibilities
  • How your roles may change as you transition away from working
  • The importance of fitness and exercise as you age
  • The right balance of we-time vs me-time
  • The level of intimacy and affection you need from the relationship
  • Maintaining healthy social and community connections 

Looking for more retirement planning tips? Our Essential Retirement Guide is designed to help you identify potential gaps and prepare to retire happy, healthy, and fulfilled!

2022 Essential Retirement Guide

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