The main challenge of retirement will be financial. Being on the same page as your spouse about income streams and retirement expenditures is key. While you and your spouse should discuss retirement plans and how to adequately save for it long before you are a few years away from retirement, when the time is nearer, there are five conversations you and your spouse should be having says Kiplinger in its article, “5 Money Conversations Couples Should Have Before Retirement”.
1) The Retirement You Both Want. You’ve heard it all before about the various ways you can retire and the activities you can partake in from travel to hours in the sun playing golf. Yet, if you and your partner have different dreams, this can present tension. Of course, relationships are all about compromise, but you don’t want to be trying to strike a compromise when you are already retired. Before retiring, you should discuss expectations and financing each person’s dreams. Having this discussion in advance will help to ensure you are both satisfied and both able to enjoy partaking in the other’s preferred activities as you will know you will be doing them ahead of time.
2) Where’s the Money? Working together on a budget is also crucial (and something you’ve probably heard), it can’t be emphasized enough. Unless you decide to work part-time, there will not be a steady work income for you to rely on. Social Security likely will not cover all your daily expenses. You will want to write a household budget and be very honest about it. Look at all your sources of income, scrutinize all your expenses (remember entertainment and gift expenditures), and throw in a miscellaneous column to create a bit of a cushion. From here, refer back to what activities you want to partake in during retirement and see how much financing can be contributed to them, maybe you need to save a little extra now or find a way to have some income in retirement to finance them.
3) Location, Location, Location! Where are you going to live? Have you considered moving to a less expensive area, or do you wish to remain in your current home for as long as you are able? You may want to consider downsizing or moving in a senior community. Maybe it is not something you wish to do immediately when you retire, but discussing how it might fit into your plan will benefit you in the end.
4) Will One of Us Work? As mentioned in 2, one of you might need to work to help supplement your retirement fund. This can be because of the lifestyle you wish to retire in or because you want extra spending money. Yet, working during retirement doesn’t have to be purely for money, it can be because you want to occupy your time with something. Leaving the workforce and immediately just moving into being retired and losing that structure can be unsettling for some. Discussing with your spouse if one of you wants to or should work is important again for setting up the expectations.
5) That Was Unexpected! You can’t plan for every expense, there will be surprise expenses like something breaking in your car or a pipe that bursts and inevitable medical complications. An emergency fund will be key for you and your spouse. Talk about how much you want to keep in the fund, at least having six months’ worth of expenses covered is a good baseline.
Having these conversations and many others about retirement is important. Remember, having these conversations once though can potentially be ineffective and overwhelming if you try to tackle it all at once. Discussing your retirement, like saving for it, should be an ongoing discussion.
Reference: Kiplinger (September 17, 2017), “5 Money Conversations Couples Should Have Before Retirement”