Ultimate Retirement Planning Guide For Married Couples: 10 Essential Steps

Planning for the future together as a married couple is crucial, regardless of whether you’re newlyweds or nearing retirement. Retirement planning can indeed be overwhelming, which is why I’ve created this article to help you.

Whether you’re just starting out or nearing retirement age, this short and quick guide will provide you with the tools and knowledge you need to plan your retirement effectively as a married couple. Let’s get started.

1. Discuss Housing In Retirement

It’s important to discuss your housing plans with your spouse. Do you want to stay in your current house, downsize, move closer to your grandchildren, or live in a warmer climate?

These are all important questions to ask yourself and your partner. Sometimes downsizing or moving to a state with better tax benefits can be a smart choice in retirement. Your current house may be perfect for early retirement but may be unsuitable for later years due to stairs or maintenance needs.

Your health also affects your housing needs in retirement. Consider different scenarios to understand what your partner wants regarding housing and long-term care. Share your views on this too, and discuss feelings about living in a retirement or nursing home if necessary.

Housing expenses can be a significant part of your retirement costs. Knowing your housing plans helps you calculate your retirement needs more accurately.

Read: How To Plan Your Life After Retirement

2. Organize Health Care And Longterm Care

Healthcare is a major expense in retirement and a common source of stress for retirees. Studies show that over half of US adults are more worried about covering healthcare costs than paying off debt. Additionally, only half of US adults have at least $1,000 in savings for emergencies, which is very alarming.

Being prepared for healthcare and long-term care in retirement is crucial for enjoying retirement without worries. However, it’s easier said than done. The average retired couple today can expect to spend at least $280,000 on healthcare costs until the end of life, excluding long-term care. Since the average retirement age in the US is 62, three years before Medicare eligibility, there’s a retirement cost gap for many pre-retirees.

There are options for maintaining coverage as a couple. You can enroll in your employer’s retiree health insurance plan and retire at 65, or retire when your younger partner turns 65. Alternatively, you can opt for an individual health insurance plan or extend your corporate insurance for up to 18 months with COBRA (Consolidated Omnibus Budget Reconciliation Act) to bridge the gap.

For newer generations of pre-retirees, access to employer or union-sponsored retiree health benefits may not be available. Consequently, healthcare costs are likely to make up a larger portion of your retirement budget. Having a plan as a couple is essential. The Financial Solutions Group at Fidelity estimates that about 15% of the average retiree’s annual expenses will be used for healthcare-related expenses, including Medicare premiums and out-of-pocket costs.

Many people assume Medicare will cover all healthcare costs in retirement, but that’s not the case. While the most basic Medicare plan is free for most people over 65, there are still overlooked out-of-pocket costs.

By the way, here is a video that explains the basics of Medicare:

To save for medical costs now and in retirement, you can save with a health savings account (HSA). That is only available through high-deductible health plans (HDHP). HSAs are a triple tax-free investment account. Contributions are made pretax. Earnings and interest on investments are tax-free, and withdrawals made for qualified medical expenses are tax-free.

For additional information, here’s a video that explains HSA:

When it comes to long-term care, it’s important to understand that there’s a 70% chance you’ll need some form of long-term care after the age of 65, and these services can be costly.

The median cost for a home health aide is $20 per hour, which amounts to $42,000 per year if hired full-time. Private nursing home costs can range from $80,000 to $100,000 per year.

It’s worth noting that health insurance or Medicare doesn’t cover these expenses. Medicare only covers short-term skilled nursing home care, and Medicaid only covers long-term care if your assets are very limited. Therefore, you typically have to pay for long-term care from your personal savings or retirement fund, or it becomes a financial burden on your family.

One option to consider is long-term care insurance (LTC), although there are pros and cons to this type of coverage. To gain a better understanding of long-term care insurance, you can download this PDF from LifeHappens.org. It has comprehensive information you need to be aware of.

3. Estimate Your Life Expectancy

Predicting exactly how long you’ll live is impossible, but gauging or estimating your remaining lifespan is doable. Remember that having an idea of how long you are in this world can definitely help you plan, particularly when it comes to your and your spouse’s expenses and savings.

Currently, the average life expectancy for men in the US is 76, and for women, it’s 81. Women should plan for a longer life expectancy as they typically live five years longer on average. However, it’s important not to solely rely on these numbers.

Meanwhile, according to the Social Security Administration:

A man reaching age 65 today can expect to live, on average, until age 84.0.
A woman turning age 65 today can expect to live, on average, until age 86.5.
One in four people who are 65 years old today can expect to live past 90 years old.
About one out of seven will live past age 95.

These statistics can help estimate life expectancy better, but individual circumstances vary. Other factors to consider include your and your family’s health history and longevity in your family.

You can use the Life Expectancy Calculator from the Social Security Administration to estimate how long both of you will live and begin strategizing your retirement finances accordingly.

4. Calculate Your Retirement Budget

Once you’ve estimated your life expectancy, you can determine the length of your retirement in years using the formula: ELEA – AAR = LRY. ELEA represents your estimated life expectancy age, AAR is the age at which you plan to retire, and LRY is the length of retirement in years.

For example, if you estimate to live until 90 and want to retire at 65: 90 – 65 = 25 years of retirement.

The next step is to calculate how much money you need in retirement. Together with your partner, list all the expenses you expect to have in retirement: basic needs, housing, insurance (including car insurance), healthcare, long-term care, activities, and retirement plans (such as buying an RV or traveling).

Remember that the expenses you have now may not apply in retirement. For instance, childcare or mortgage payments if you plan to pay off your mortgage before retiring. However, predict potential new expenses you may have in retirement.

Once you’ve calculated your monthly retirement expenses, multiply this by 12 to get your annual estimated expenses in retirement. Before multiplying by the expected retirement years calculated above, remember to apply a 3% annual inflation rate.

To ensure accuracy, you can utilize various tools and resources like a retirement calculator from Nerd Wallet or Smart Asset and go to a financial advisor from NAPFA.org or FPA. Or ask for a financial advisor via your employer.

Many people use the 80% rule as a rough estimate. For instance, if your current annual income is $50,000, you might estimate spending about 80% of that in retirement, which would be $40,000 annually.

However, the 80% rule doesn’t account for the 3% annual inflation factor, which can lead to inaccuracies over time. It’s essential to delve into your expenses more precisely as a couple.

Once you’ve determined your retirement needs, explore different scenarios with your partner. You can adjust retirement ages and savings rates to see how they impact your overall retirement expenses. This process helps you plan for your retirement goals effectively, whether it involves retiring earlier, working longer, or saving more diligently.

5. Save For Retirement

After determining your retirement needs, the next step is to ensure you’re saving enough to meet those needs. If you’re already saving for retirement through a 401(k), employer pension plan, or personal savings, it’s time to evaluate these plans against your estimated retirement expenses. Are you on track, or do you need to save more?

If you haven’t started saving for retirement yet, it’s crucial to begin as soon as possible. Starting early provides more time to save enough money for retirement.

Most retirees’ income sources include:

Social Security retirement benefits
Employer pension plan(s)
401(k), 403(b), or IRA savings
Personal savings
Income from a retirement job (if necessary or desired) and other investments

However, relying solely on a pension plan or 401(k) may not be enough. Additional savings through personal savings or investments may be necessary. In some cases, couples may need to consider obtaining a retirement job if they’re unable to meet their financial needs.

Here’s a quick informative video on why relying solely on pension is discouraged by a few experts:

Anyway, to calculate how much extra you need to save for retirement, use this formula: Total Estimated Retirement Expenses – Total Income = Extra Savings Needed. Once you’ve determined the extra amount needed, create a monthly savings plan with your partner to reach your retirement goals.

For additional information, you can watch this informative video:

Meanwhile, if you’re interested in investing and you don’t know where to start, then this video can help you get a better understanding of where and how to begin investing:

6. Strategize Your Social Security

As a married couple, strategizing your Social Security payments can be very beneficial. You have the option to claim benefits based on either your own work record or your spouse’s (or ex-spouse’s) work record.

Maximizing your Social Security income involves timing your individual and spousal claims correctly. You can start collecting Social Security as early as age 62, but keep in mind that the earlier you start, the smaller your monthly benefit will be. You’re entitled to your full Social Security benefit at your full retirement age, which ranges from 66 to 67 depending on your year of birth.

Check the table below for reference:

Each year you delay claiming, your benefit grows. If you wait beyond your full retirement age, you’ll receive an even higher benefit. For example, if your full retirement age is 66 and you start claiming at age 70, you’ll receive 132% of your scheduled benefit per check. However, if you claim at 62, you’ll only receive 70%–75% of your scheduled benefit per check.

The ideal strategy depends on factors such as your age, your spouse’s age, and the timing of your claims. Social Security payments vary per person, but the average benefit was $1,461 per month in January 2019.

Many married couples maximize their benefits by having one spouse claim early and waiting as long as possible to claim the other spouse’s benefits to allow them to grow.

To get more information on your Social Security retirement benefit, use the retirement plan form from the Social Security Administration. Make sure to create a My Social Security account first for you to fully utilize the form and have an accurate estimate based on your work record. It’s also important to check your Social Security statement annually to ensure your earnings history and taxes are recorded correctly.

If you were married for more than ten years, you may also be able to claim Social Security benefits based on an ex-spouse’s work record.

7. Up-Date Your Finances And Beneficiaries Regularly

Financial security is a cornerstone of a successful marriage. As a married couple, jointly managing your finances requires a proactive approach. This includes regularly updating your financial information and keeping beneficiaries informed of any significant life changes.

Remember that having an up-to-date financial record keeps your financial picture clear, allowing informed goal-setting and collaborative money management. It also allows you to notify beneficiaries of life changes (marriage, birth, etc.) to ensure your assets go where you want them.

So, regularly update all financial records (accounts, investments, insurance) for preparedness and confident navigation of life’s surprises. And be sure to have open communication about finances, including regular updates, as it builds trust and strengthens your financial foundation as a couple.

8. Stay Informed About Financial News

What you plan for today may not remain relevant in the future. Regulations, taxes, funds, and other financial and government rules can evolve over time. Therefore, it’s crucial to stay informed about major changes within the financial industry and evaluate how they may affect your financial situation.

It’s highly probable that you’ll need to adjust your financial retirement plans over the course of a decade or longer due to changes in regulations and laws. We live in a fast-paced world, and as a result, systems change accordingly.

So, regularly reassess and adapt your financial plans to ensure they remain effective and aligned with your goals amidst evolving circumstances.

9. Decide To Retire Together Or Separately

After completing the financial calculations, you may have determined whether it’s best to retire together or at different times. However, financial considerations are just one part of the equation.

There are other factors to consider before deciding on simultaneous or staggered retirements. Perhaps both partners aren’t mentally ready for retirement at the same time. One partner might prefer to ease into retirement by freelancing for a few years and gradually reducing working hours, while the other desires immediate retirement.

Retirement is a significant life transition that requires time to adjust. It involves finding a new identity, purpose, routine, hobbies, and social life outside of work. These adjustments can be challenging for both individuals to navigate simultaneously and may serve as a reason for couples to retire at different times.

Remember that allowing space for each other to adjust at their own pace can promote a smoother transition into retirement for both partners.

Read: Should You Retire As A Couple At The Same Time

10. Plan Retirement Dates

To make retirement planning more enjoyable, consider organizing dates with your spouse to discuss retirement together and spend quality time. You can also go on double dates with other married couples to exchange ideas and solutions about retirement.

Taking it a step further, you could start a retirement club. Similar to a book club, a retirement club provides a platform to discuss retirement possibilities, gain a broader understanding of retirement planning, and gather new ideas from others in a supportive and collaborative setting.

This approach adds a social element to retirement planning and can make the process more engaging and enriching.

Conclusion

Retirement planning for couples can feel daunting, but it doesn’t have to be. This guide hopefully has walked you through the key steps to take control of your future and create a fulfilling retirement together, regardless of your current life stage.

And to further help you out, I suggest that you read the other guides and articles on my site to solidify your retirement plan. Here are some of the recent ones that I published:

Happy reading!