Are you and your spouse planning for retirement, or are you just saving for retirement? It’s an important distinction that people tend to miss. If you’re focused on saving, saving, saving, there’s a good chance you’ll get to “the good years” and have a lump sum, but no idea of how you actually want to spend it. Worse still, you might have trouble accessing those funds without triggering substantial taxes, or discover that you’ve set your partner up for financial hardships once you’ve passed. That’s why planning is essential: the sooner you can work together to dial in your future retirement plans and beyond, the more effective those plans will be–and the better your golden years together will be. Here’s what to talk about now so you can prepare emotionally AND practically for your dream retirement together.
What Does Retirement Satisfaction Look Like for Us?
Many couples retire with the idea that not going into the office anymore will automatically mean more, better time together and a more fulfilling life by default. Unfortunately, there are a few pretty big assumptions being made there!
To start with, what one of you finds relaxing or considers a priority might not appeal to your partner. You may be looking forward to an annual cruise to reignite the romance, while your spouse is hoping to make a few home improvements. That’s not to say you can’t do both, but if your retirement savings only allow for one or the other per year, it’s a good idea to communicate ahead of time so you can save and plan in a way that balances each of your goals–especially if one of you is a spender and the other is a saver, or if you have different ideas of what your risk tolerance should be.
Take time to map out your perfect retirement together, and don’t be afraid to get specific. What does an ideal week look like? How much time are you spending babysitting grandkids? Would you rather take vacations to reconnect as a couple or to spend more quality time with the kids? Talk about it now so your expectations–and your financial preparations–line up.
How Will We Handle Our Retirement Income?
One of the biggest challenges retirees face is switching gears from a monthly paycheck mindset to managing withdrawals. You’ve spent a lifetime budgeting on a monthly basis (bills, groceries, savings), but now you’ll need to make your savings act like a monthly paycheck. This is why we love Modern Annuities®: monthly dividends are easier to manage than an annual withdrawal, and they feel like income, which helps take the fear out of spending your savings. However you structure your retirement income, work together to establish an income strategy and budget that helps you enjoy your retirement goals without worrying about running out of savings.
Another important conversation is what your financial future looks like when one of you has passed. Without proper retirement income planning, tax and Medicare surcharges can cost the surviving spouse up to three times as much as when both partners were living! This financial burden, known as “The Widow’s Penalty,” means it’s not only prudent to have a plan, it’s one of the best ways you can continue to care for your partner after you’re gone. Modern Life Insurance™ and Roth conversions are both invaluable tools that couples can use now to reduce taxes and offset these costs.
What Kind of Legacy Do We Want to Leave?
One of the reasons why legacy planning is so important is because it’s not something you can leave until the last minute! It can be tricky to ensure your savings last for your lifetime, let alone last beyond it. Do you plan to leave your IRA balance to the grandkids? Talk now about how that will impact their taxes and what you can do to reduce them. Will you be leaving a death benefit through a Modern Life Insurance™ policy? What kind of estate taxes, if any, will your children or grandchildren have to deal with after you’re gone?
Leaving a sizeable inheritance is a gift to the next generations. Leaving a tax-free inheritance is even better, but it requires a proactive approach. We work with many couples who come to us for legacy-planning guidance, and we’re able to help them implement strategies like Roth conversions and Modern Life Insurance™ products. This kind of planning helps reduce taxes now, so you can leave more for your loved ones, and reduce taxes for your beneficiaries.
Start the Conversation
Successful retirement planning isn’t about spreadsheets as much as it’s about defining what you want to achieve and experience together, and learning what you need to do to get there. The Parady Learning Lounge® is the perfect way to plan smarter together before you get to retirement. It’s your future, and we’re ready to help you live it your way.
