3 Common Retirement Mistakes Couples Make
The topic of retirement is a sticky one that is often filled with anxiety and fear. We look forward to this golden age in our lives, but we also worry about where we will go next. If we are attached, that concern automatically extends to our partners and how retirement will affect the both of us. As the era of retirement looms, a plethora of options become available. How do you ensure that you make the right decisions? As a start, here are 3 mistakes that you should definitely avoid.
Failing to set expectations
When you think of your retirement, what do you see? Long days on white sandy beaches, or perhaps you're settled into the couch in your current home while reading a book? While both are equally good options, do you know what your partner thinks of? By the time couples are at a retiring age, they have overcome most of life's hurdles together - the initial adjustment to marriage, the raising of children and the completion of a mortgage.
Through all of these events, retirement may have been on the backburner and it's not uncommon for people to be unaware of what their partner expects. To avoid emotional as well as financial trouble, couples should have a frank discussion about their lives post-retirement1. If one partner plans to travel, more money needs to be set aside for this to be feasible. If the other partner enjoys spending lots of time at home, new boundaries have to be discussed to avoid friction.
Having one person handle the finances
In all the roles we are assigned in life, there is a degree of specialization. A student has to choose a major, and a company has to choose a trade. Being part of a couple is no different. Too often, one member of the partnership is more involved in the managing of finances while the other simply trusts that there is still money in the bank. This may cause the relationship to be out of balance due to the amount of control one party has over the other. Couples should be equally involved when it comes to retirement planning and large financial decisions2. Even if you or your partner are not nitpicky when it comes to day to day spending, partners should consult each other over where they want the majority of their funds to go.
Failing to plan for unforeseen circumstances
Couples often underestimate the amount that they would need during retirement, and end up saving less than they should1. Add the rising cost of living along with constant inflation, the value of the nest egg may become progressively less. When both parties stop working around the same time, it is best to remind ourselves that we now have a finite number of resources. Expenses that did not seem significant previously (eg. home repairs, vacations, accidents) can have a serious toll on their overall savings.
Furthermore, it is best to keep in mind that as you grow older, the higher the likelihood of incurring medical costs. Health insurance coverage tends to stop after a certain age, and unfortunately that's when most people require it the most. It is important to set aside an emergency fund3 that could be used to subsidize medical or long-term care costs just in case it becomes necessary.
When it comes to retirement planning with your partner, the key takeaway is the importance of communication. Open and honest channels of communication will help to bridge the gap between what the both of you expect and how best you can both achieve your retirement goals. Realistic and responsible planning may also help the both of you avoid financial strain due to emergencies and allow for more leeway if one does occur. Everyone dreams of a retirement that's filled with relaxation, laughter and fun. Why not take the right steps to make it a reality?
1. USAtoday.com, "Seven big mistakes couples make in retirement", April 8, 2014.
2. TheGlobeAndMail.com, "Four retirement mistakes that even smart couples make", February 18, 2014.
3. Key.com, "The Six Financial Mistakes Couples Make", undated.