Money Secrets and Lack of Planning Harm Retirement Dreams

Retirement Planning

By all accounts, David and Margie Stapleton did an admirable job reaching their financial goals before retirement.

They have a minimal home mortgage and moderately low debt. Their three children are college graduates. They are healthy. What’s not to like in retirement?

Well, a few things.

“We’re OK, but it’s not like we’re going to be traveling the world on exotic vacations,’’ said David, who had a 35-year career in retail sales.

“We always took care of things that we needed,’’ added Margie, a medical technician. “I wish we would’ve planned better for retirement. Everybody probably says that. But I’d tell young people you probably can’t plan enough or talk about it enough. Don’t wait.’’

The Stapletons’ story is typical for many Americans. According to a Harris Poll of more than 1,800 Americans in a relationship — either a married couple or live-in partners — one-third said neither partner was saving for retirement and there was plenty of evidence about a lack of communication on retirement planning.

Harris Poll Survey Findings

  • Of the 36% who said their partner is saving for retirement, about one in four (23%) didn’t know how much the partner is contributing to retirement accounts.
  • 21% of the respondents said they didn’t have a general sense of the total value of the partner’s retirement account.
  • Of the respondents with at least one partner saving for retirement, 30% said they didn’t talk to each other about how much money they will need to retire.

“It’s so essential to have a plan when it comes to retirement, but so many people don’t even know where to start,’’ George Washington University professor Annamaria Lusardi said. “You have to be organized if you are one person. If there are two people, it’s so very helpful to be on the same page.

“And that starts with identifying your retirement goals. If you don’t have goals — or don’t know your goals — then it’s much harder to get there because there is a good chance you are squandering some resources. That’s due to a lack of knowledge.’’

According to the survey, three out of four (76%) Americans in a relationship said they have discussed general retirement planning issues — the age they want to retire, where they would like to live, what they want to do with free time — but specifics weren’t a priority.

Couples who plan to rely on spousal Social Security are in for a rude awakening. The average monthly benefit for a retired couple who both receive Social Security benefits is $2,212, generally not enough to replace pre-retirement income. Yet about half of retired couples count on Social Security for 50% or more of their income, while 21% of couples depend on the monthly check to provide 90% or more of their income.

You can estimate your future social security income with a social security calculator.

There are two choices for people who want a pleasurable retirement situation: Plan on a dramatically downsized lifestyle or invest money now in building retirement savings that can cover income shortfalls.

If it’s the latter, that requires another characteristic to be executed by any smart couple: communication.

How to Communicate with Your Spouse About Retirement

Talk about available resources. For example, a couple that saves $5,000 a year in a Roth IRA earning a 5% average annual return over 30 years will have approximately $332,000 in savings — or about $180,000 more than if they had left their money in a typical bank savings account earning minimal interest.

When both partners have careers, you’d imagine a huge savings advantage. But there might be different ideas on how to save money, future financial needs and strategies for investing in retirement savings.

The best use of savings account is for short-term financial needs, such as the down payment on a home or car. Otherwise, both partners should contribute to a workplace retirement account (at least to the point of matching contributions), while opening a brokerage account to set up a Roth or traditional IRA.

But in all cases, communication is essential. What’s the best course of action and what are some suitable topics?

Be Honest About Your Finances

Everything goes on the table. According to a May 2016 Harris Poll for the National Endowment for Financial Education, two in five Americans with combined finances lied to their partner or hid information about money. Not a very good idea. Fess up about your 401(k) loan, credit card debt, and other financial skeletons.

Budget According to Your Goals

Everyone likes to talk about the fun stuff — retirement homes, vacations, activities — but it’s necessary to crunch the numbers and make appropriate plans. Dealing with financial figures can be paralyzing. Fight that sensation and create a monthly budget that aligns with your retirement goals. Blissful ignorance is the path of least resistance, but certainly not the most profitable.

Pay off Your Debt

Both partners must be forthcoming about what they owe, so the goal of being debt-free might be achievable at retirement. According to BMO Wealth Management, there are disturbing trends for retirement-age people who are carrying credit card debt, mortgages and student loan debt for their children (or grandchildren). A survey by the firm determined that only 40% of Americans age 60 to 64 own their homes with no mortgage debt.

Figure Out When You Want to Retire

Sometimes, one spouse retires before the other, maybe due to an age difference or perhaps retirement benefits kick in sooner than later. Some people just like to work at something indefinitely, while others can’t wait to end their career and move on to other activities.

Plan for The Lifestyle You Want

It’s a good idea to talk about the retirement lifestyle with your spouse. Each partner should make a list of desired retirement activities, and then the results can be compared. How much will you want to do together? How much will be done alone? Agree on that ahead of time.

For couples who are accustomed to working separate careers and work schedules, having a lot of shared time can be a big adjustment, even for those who truly enjoy each other’s company.

Plan for Obligations

Will adult children live with you? How much help will you provide for the grandchildren? Are there aging parents in need of care? All of these factors can put a dent in retirement savings – sometimes a huge dent! – and must be discussed before you retire.


Sources:

Hughes, D., (2016, 13 October), Six Retirement Conversations Every Couple Needs to Have, U.S. News and World Report. Retrieved from: http://money.usnews.com/money/blogs/on-retirement/articles/2016-10-13/6-retirement-conversations-every-couple-needs-to-have?int=retirement-rec

Rosen, M., (2016, April/May), Advice for Couples Who Stagger Retirement, AARP Magazine. Retrieved from: http://www.aarp.org/work/retirement-planning/info-2016/retirement-planning-tips-for-couples.html

Eisenberg, R., (2016, 1 October), This Is The Biggest Way Couples Screw Up Retirement Planning. Retrieved from: http://www.huffingtonpost.com/entry/this-is-the-biggest-way-couples-screw-up-retirement-planning_us_57e96d24e4b0e80b1ba3838b

Yochim, D., (2016), Study: Money Secrets and Sluggish Savings Put Couples’ Retirement Dreams at Risk. Retrieved from: https://www.nerdwallet.com/blog/investing/study-couples-keep-retirement-savings-secrets/

O’Shea, A., (2016, 29 September), One-Third of Americans In A Relationship Aren’t Saving For Retirement, Forbes Magazine. Retrieved from: http://www.forbes.com/sites/arielleoshea/2016/09/29/how-couples-are-sabotaging-their-retirement/#2b5ef86f39c8

Joey Johnston
jjohnston@incharge.org

Joey Johnston has more than 30 years of experience as a journalist with the Tampa Tribune and St. Petersburg Times. He has won a dozen national writing awards and his work has appeared in the New York Times, Washington Post, Sports Illustrated and People Magazine. He started writing for InCharge Debt Solutions in 2016.