A successful marriage is all about communication. So, it make sense that the same can be said about a successful retirement.
Retirement planning is tough enough, but when it comes to couples some of the biggest mistakes can be related to the lack of communications, according to the financial planners surveyed for the 2015 Fidelity Investments 2015 Couples Retirement Study. There are couples who just don’t take the time to adequately discuss retirement, especially financial matters, according to the survey.
The study also shows that the majority of couples surveyed (72%) believe they communicate exceptionally or very well about financial matters. But in the same survey, 43% could not correctly say what their spouse’s salary is.
Couples need to talk about finances and they must be honest about finances, planner say. According to a survey by CreditCards.com, nearly 7% of the adults surveyed said they hid a secret financial account from their spouse or partner. Two-thirds said they have a hidden credit card account, and 45% have a secret savings account.
Jeremy Keating at Capital Income Advisors in San Diego, says he’s had people nearing retirement sneak money from savings accounts to pay off credit card debt that the other spouse was not aware of. That hasn’t always ended well for the spouse hiding the debt, he says.
So, when looking at some of the biggest mistakes couples can make in retirement planning, communication would be at the root of some of the biggest, say financial planners.
So, here’s five of the biggest couple mistakes most commonly quoted by financial planners.
1. No income plan.
Couples have problems when they don’t have a cohesive financial plan that both have bought into, says Keating.
“The big mistake as you get older is not having an income plan,” he says. “I have clients where one is spending and one is a saver. That creates friction – one is saving all they can while the other is buying everything they can.”
”Work with the end in mind,” he says. “From a couple perspective, where do you want to end up, and how do you get there?” he asks. “In my career, I always start with cash-flow plan. How much do you want to live on? What are liabilities? What is your social security and how long will it last.
He says often when he looks at the couple’s initial plan, they would run out of money by the time they are 75. In some cases, the advice he ends giving them is that they either have to move or adjust their spending.
2. Not changing savings and investment strategies after retirement
A big one, says Kirk Cassidy, president of Senior Planning Advisors in Farmington Hills, Mich., is not changing their investment/saving strategy when they enter retirement.
“One obvious (mistake) is assuming the same strategies they used during accumulation phase will work in distribution/preservation stage,” says Cassidy. “Working with the same financial professional they have worked with in their accumulation phase is a mistake I see a lot. Instead, it might be wise to find a financial professional who has experience in the creation of retirement income strategies.”
3. Not having a budget.
Keating says a big mistake couples make is when there is not a buy-in on a budget by both spouses. “What is your budget and are you adhering to it? Are both people on board?”
The can lead to big problems, like running out of money in retirement, he says.
“Couples don’t just argue about money, they argue about debt,” Keating says.
4. Underestimating the impact of taxes.
“Underestimating how much you can save in taxes and value of doing that in retirement is a mistake,” says Cassidy. “If you can save money in tax planning, I don’t’ have to take on greater risk in the market. That is one way to limit the amount of money that is exposed to market risk. And not understanding that is a big mistake.”
5. Not having an emergency savings account.
That emergency savings is even more important in retirement than it is during your work life. Think about it. In retirement, you are on fixed income and big unexpected expenses, like that big auto repair or new air conditioning unit for your home can cause unforeseen consequences if you have to take money from your retirement account – like taxes you were not prepared for.
“A big mistake is not having that emergency savings,” Keating says. “We all want to pay off debt. And even when we are saving for retirement, we always forget about things that come up unexpectedly.”
“When I see my clients are couples and they are financially happy, they all agree on how much to save, how much to spend, what the budget is,” says Keating. “They look at the plan with me. The majority of my clients, when I meet with the husband or wife, but not both. Most of them, that’s the way they work. That could be a problem if one passes away. I always like to get a buy in. ideally, when we meet you are both here.
“One of the biggest mistakes is not being involved,” he says. “No one likes dealing with this stuff. It’s boring. But reality is once you understand the fundamentals, it’s not rocket science. We all know what to do. “
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