1 Important Conversation to Have with Your Spouse Before Retirement

Your views on money will change throughout your life. Your lifestyle will evolve and your goals will change as your dreams.

Taking that financial journey with a spouse can be fulfilling and bring you closer. But it’s not always easy, and pulling too hard in different directions can strain relationships or ruin them altogether.

If there’s one conversation you should have with your spouse before retirement, it’s about building your financial plan for the future. All good things start as dreams, but plans make them come true. Building the plan together will help you grow and thrive together instead of growing apart.

Here are some important topics to cover when you have that conversation.

Get a pulse on your finances

Perhaps you are a young couple about to start a family. Or maybe you met your spouse later in life and are preparing for retirement as newlyweds. No matter where you are, you need to assess where you are today before you can imagine where you are going.

Start by creating a budget. List your monthly income and then your expenses. Budgeting helps you understand where your money is going. You’d be surprised how money drains from your bank account. Been there — subscriptions you forget about, that snack or coffee you grab on the go, you name it. Plus, some couples keep separate bank accounts, so this is a great opportunity to get on the same page. The goal should be to fund a lifestyle that doesn’t consume 100% of your monthly income. If you spend every dollar you earn, there is nothing left to build for the future.

Next, estimate how much money you’ll need to retire. A common rule of thumb is that you will need 10 to 12 times your annual salary in your retirement year. So if you earn $100,000 in your last year of work, your retirement savings should be around $1 million to $1.2 million. Your age and personal situation could make this exercise difficult, so don’t hesitate to talk to a professional financial advisor if necessary.

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Now, you’re ready to create a retirement plan together. List your assets (property, 401(k), investment accounts, etc.) and liabilities. Find out the gap between your current wealth and your retirement goal. Discuss how much you need to invest to reach your goal by the age you want. There are free tools online that can help calculate retirement savings. Consider whether paying off debt can free up cash flow in your budget. You don’t necessarily need to focus on low-interest debt like a mortgage, but high-interest debt like credit cards can derail a financial plan, so you should pay them.

After that, it’s as simple as meeting monthly to budget and stay accountable to your plan.

Importance of action

For most people, investing is an essential tool for retirement planning. Investing creates wealth because your returns grow as they grow. This means that the more you invest, the stronger the combination becomes. You and your spouse need to understand where you stand on the financial timeline.

Putting off retirement savings to fund an extravagant lifestyle can cost you.

Consider the financial decisions of two similar couples:

• Couple A starts from scratch and invests $1,000 monthly from age 35 to age 65 (30 years). They have an average of 8% annual return on their investments.
• Couple B does the same, only they wait five years to start. They invest $1,000 monthly from 40 to 65 (25 years) and average the same returns of 8%.

Couple A will withdraw $1.5 million, while Couple B will withdraw $958,000.

Most people mistakenly assume that they can easily offset their contributions later in life. They focus on what they are giving up ($60,000 in this example) but fail to understand the combination they are losing.

The reality is that putting off your financial plan for silly reasons costs a lot more than most people realize.

Enjoy the ride

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Finally, find the right balance in your financial plan.

Life is short, and you don’t want to miss out on memories, friends, and time with your spouse to downsize and save for the perfect retirement. You don’t want to retire without a financial safety net, but overcompensating the other way can be just as bad.

As long as your retirement savings are on track, you shouldn’t be shy about spending money and having fun. Contrary to the saying, you can have your cake and eat it too.