I’m a strong believer that a couple that budgets together, stays together. Because money can be the most contentious topic that couples have to deal with, why not put it all out in the open? Making decisions regarding money shouldn’t ever be one-sided, both parties should be involved, and there should be clear communication.
When it comes to making decisions about your retirement fund, it’s even more important to communicate. There is paperwork to fill out, and questions to answer like your investment options, what goals should we set? Roth or Traditional? and it’s a lot for one person to handle.
What are your investment options?
There are a lot of companies that like to get their employees involved in their retirement planning, and those companies usually have a lot of investment options. While the main holder of the account might feel that it’s their duty to decide what the money is invested in, it absolutely should be discussed with their partner.
There are new groups popping up everyday called Money Clubs, where couples and single people alike are getting actively involved in their finances. You and your partner talking about investments and money in general is an essential part of a couple working together for a brighter future.
Communicate with your partner
What’s unfortunate about a lot of couple’s retirement savings is that there’s usually one person that has more information than the other. Usually the person that’s more informed is the one that has the account (most likely) through their place of work, and the other is left in the dark.
The way that this can be remedied is by both partners getting as involved as possible, and seriously discussing their options, and their goals. How much can be contributed to retirement accounts? What age is best for us to start taking distributions? Don’t leave any stone unturned.
What are your goals?
Do you know where you will be in 30 years? Hopefully retired, right? But at what age specifically? How much do you plan on taking in distributions? Do you plan on still working after retirement? Where will you live? This all might seem too far off to start planning now, but it couldn’t be more important to have these goals clearly set now, so that inevitable surprises and setbacks don’t completely derail your goals.
Setting and meeting short term goals, such as quarterly and yearly financial goals is also important.
If you and your partner determine that there is a great divide between your retirement dreams and what you think you can afford, don’t despair. There’s plenty you can do to build your bridge.
First, how many “need” items can you afford? If you have enough resources to pay for all of your “needs”, your work may be done. At this point, it’s just a question of how much money you’ll have leftover to pay for the “wants” and “wishes” as well as your ability to compromise with your partner. But if you won’t have enough to cover all the things you agree you “need,” it’s time to compromise together.
Would you both agree to retire in a different, less expensive area? If so, you could save a bundle. For example, if you retire to Amarillo, Texas from Los Angeles, you might be able to maintain the same standard of living with 41% less income.
If you aren’t both willing to move, could you agree to sell your house and rent instead? That can free up a great deal of capital and reduce your costs.
If neither of these options work, would you be willing to cut spending, invest differently or do both? This shift could be meaningful.