It’s not unusual for one person in a marital relationship to do the retirement planning. Perhaps you’ve given your spouse the reins on retirement because financial planning just isn’t your thing. Of course, your partner has both of your best interests in mind, but are you certain they’ve been planning both of your retirements properly? There are a lot of different avenues when it comes to retirement planning, and all the choices can muddy the waters. Even if you’re in the background part of the planning, it’s important to make sure your spouse is on the right track. How can you tell? Check out 11 ways to know if your spouse has been planning properly for retirement and answer the question for yourself!
1) They Stick to A Budget
Creating a budget is one of the first steps to ensure a successful retirement. This shouldn’t happen right before retirement or after you’ve retired. Budgeting and being mindful about daily spending habits is important throughout life. A retirement budget can be implemented at any age. The sooner you pinpoint an amount you want to save every month, the bigger your nest egg will be by the time you reach retirement age. How is your spouse with money? Does he or she spend frugally, with reckless abandon, or somewhere in between? It’s imperative you both are on the same page when it comes to what you spend your money on and where your priorities lie. Check in with your partner and consider creating your retirement budget together. When your Social Security benefits do start arriving, the budget should be adjusted to the new monthly income.
2) They’re Working with a Financial Advisor
Planning for retirement alone is overwhelming. Unless your spouse is super-investment savvy or works in the financial field, it’s a good idea to talk with a financial advisor about retirement planning. There are a lot of options and these advisors are professionals who specialize in making sure you’re set for life. That being said, you also want to make sure you work with a reputable company and with an advisor you can trust. It’s a good idea to do as much research as you can prior to meeting with an advisor. Be as informed as possible about the options and ask the right questions about every opportunity presented. Different stocks, bonds, mutual funds, and investments come with different fees. Be sure your spouse has exhausted all the options and inquired about initial purchase fees, maintenance fees, and the investment’s flexibility.
3) They’ve Got a Strong Portfolio
The financial planning part of retirement is tricky – there’s no doubt about that. That’s why working with a financial advisor who specializes in retirement is key. Ask questions about what investments your spouse has made and stay informed about what’s going on with your investments. A strong portfolio should include a mix of stocks, bonds, mutual funds, and perhaps an annuity. It may be easy to get carried away, so a good general rule of thumb is having no more than 5 or 6 different investments. It’s also imperative to know each investment inside and out. If you don’t really know where the money is going or coming from, it’s impossible to truly tell if that investment is necessary. Make sure you know exactly why you bought each investment, what the risks are, and what you’re getting in return.
4) They’ve Got Savings
There’s no substitute for money in the bank. Having a stash of liquid cash is a sure-fire way to go into retirement feeling relaxed. Remember though, this money isn’t for your daily spendings and bills. Consider it as a rainy-day fund. You’ve got it in case of emergency, but it shouldn’t necessarily be used often. There will likely come a time during retirement when your Social Security benefits don’t cover the cost of something. Maybe there’s something you really need that isn’t part of your pre-crafted budget. A strong savings is invaluable to retirees. It’s there if you need it immediately, and that’s important. A large chunk of cash that not tied up in your portfolio, stock, bonds, or other investments is a crucial part of a well-thought out retirement. This means you can take that money whenever you want. Have you and your spouse both got a cushy savings?
5) All Their Eggs aren’t in One Basket
The first four points of this article are extremely important. They aren’t the type of options that you can pick and choose from. Every one of these boxes should be ticked. Making sure your eggs aren’t all in one basket kind of summarizes the first four points. To make sure all your bases are covered, your spouse should have a strong savings, a mixed portfolio, a trusted financial advisor on hand, and a budget. Keeping your money spread out in different areas will ensure that you’ve got a Plan B (or C, or D) in case the market takes an unexpected negative turn or you had to tap into your savings more than you’d planned. Maybe you’re having a tough time sticking to the budget you created. You can use any of the previously mentioned ideas to supplement your income. Keep your options open so you’re never facing a dead end.
6) They’re Looking to Downsize
You probably hear this word mentioned a lot with retirement. It’s because it’s a very important piece of a savvy retirement plan. It’s also a part that some overlook or can’t be bother to do. Downsizing means ridding your life of anything that doesn’t fit your retirement lifestyle. The crux of downsizing is usually your house. Most older couples who’ve had children live in a house find it becomes too big once their kids grow up and move out. The money spent on maintenance, electricity bills, and insurance are higher than necessary. The solution is downsizing, which means moving into a smaller house that’s more cost effective. While it may be hard to put your family’s house up for sale, it’s necessary reduce your expenses and live within your means. Make sure your spouse has one eye on the housing market and is making plans to sell.
7) They’re Looking to Relocate
Downsizing doesn’t just mean moving down the street to a smaller house. It could mean moving across state lines or even across the country. It’s important that your spouse understands that the city or state you live in now, may no longer be affordable once you stop working. The paychecks you’ve become accustomed to are going to halt. While you will receive Social Security benefits, know that these are much lower than your normal salary. Therefore, the life you were once able to afford may not be so attainable in retirement. Don’t panic. Lots of retirees avoid this financial strain by downsizing and relocating. Real estate costs and taxes are not the same everywhere. There are some states (Arizona, Florida) that are well-known for welcoming seniors who live on a strict budget. Keep an open mind about location as you make plans to downsize.
8) They’ve Got Hobbies
You maybe wondering what this has to do with a well-planned retirement. While the financial side has a lot to do with a comfortable retirement, it’s important not to discount the mental and emotional side. Life changes drastically when you stop working. You leave behind the social support of colleagues, after work get togethers, and the daily routine. If your spouse was 110% dedicated to work, spent more time in the office than out, or socialized mainly with coworkers, retirement may be a difficult transition. It’s important that both of you have hobbies or interests outside of work to keep your mind and body motivated, active, and involved in the community. The last thing you want is one of you moping around the house, bored and lonely. Make sure you’ve both got your social bases covered before you retire.
9) They’re Delaying
Sometimes avoiding something can be a good thing! Retiring early significantly affects the amount of money you’re able to get from Social Security. Generally, it’s not a good idea to cash out early. If your birthyear falls between 1943-1954, the “normal” retirement age is 66, increasing slightly until the end of 1959. If you were born in 1960 or later, the normal retirement age is 67. Therefore, most Americans retire between the ages of 66-67. But did you know you’re rewarded handsomely by delaying retirement past these ages? The later you claim your Social Security benefits, the more money you’ll receive. Social Security pays you an additional 8% on every year you work past your normal retirement age up until age 70. After 70, there’s no additional benefit to wait and your monthly payments could be 75% more than if you claimed at 62! Holding out has serious benefits.
10) They’ve Worked For 35 Years
This is the U.S. government’s magic number for calculating Social Security benefits. Simply, the Social Security Administration (SSA) averages your monthly earnings during the 35 years when your income was at its highest. This is another reason why working past the Full Retirement Age (FRA) is a good idea. Your salary is likely at its peak near the end of your career which boosts your average since the SSA is looking at your highest earning periods. They then adjust your wages for inflation before crunching the numbers. If you can log 35 years, it optimizes your Social Security benefits as you have consistently high numbers in each of the “boxes” being calculated. If you don’t, the government uses zeros for the number of years you’re lacking. Clearly, averaging zeros into the formula will drag down your basic benefit amount – the amount you get when you retire at full retirement age (FRA).
11) They’re Exhausting the Options
Thinking about failed marriages or a deceased spouse is obviously not pleasant. However, you may be entitled to more retirement money if you’ve gone through either situation. If you were married for 10 years or more before divorcing a previous spouse, you can claim up to 50% of their earnings. For example, if you were a stay-at-home-parent for a period, it’s normal you’d have a smaller income history and savings. So, you have the option to claim either 50% of your ex-spouse’s earnings or 100% of your own – whichever is greater. You may also be able to collect all of your ex-spouse’s Social Security if they passed away. The conditions state you must be at least 60, have been married for at least 10 years, and not have remarried before you turned 60. Revisiting the past may have some financial benefits as you and your current spouse face retirement.