Advice on How to Stay Happy Together With a Joint Retirement Plan

Written by , June 21, 2012

Advice on How to Stay Happy Together With a Joint Retirement PlanOne of the things that couples most look forward to as they get older is spending their retirement years together. Retirement can also be a time to travel and spend time visiting family and loved ones. Staying happy during retirement years will depend in large part on having made good financial decisions towards a joint retirement plan, so that there is enough money to support the retirement lifestyle they want.

Unfortunately, retirement accounts are designed for individuals, so there’s no such thing as a joint IRA account or joint 401(k) account. Instead, you’ll need to come up with a joint retirement plan that allows each of you to save toward your common retirement goals.

Here is some retirement advice and factors to consider when preparing your retirement plan.

  • Identify Your Goals. The first step is to identify your retirement goals, so that you have something to build your plan around. The most significant aspect of this step is coming up with a target savings amount that you would like to have when they first want to view enters retirement.
  • Who Can Contribute What, and When? The ideal retirement savings plan would have each spouse maximize their retirement contributions each and every year. In reality, this isn’t likely to happen every single year. So if you can only afford to make the maximum contributions to one person’s account in a particular year, you’ll need to take into account the immediate and long-term effects that the same deposit would have in each person’s respective account, particularly if the spouses are not close in age or are in significantly different tax brackets. For example, there may be some advantages to funding the retirement account of the younger spouse (so that the deposit has more time to grow), but these benefits must be weighed against the benefits of a larger tax benefit this year if the older spouse pays taxes at a higher rate.
  • Make Sure Proper Beneficiaries Are Named. If the aggregate balance in one spouse’s retirement accounts is significantly different than the other’s, then it might make sense to do a bit of estate planning when it comes to naming the beneficiaries on those accounts. For example, the spouse with smaller accounts might wish to name their children or selected charities as their account beneficiaries, as the other spouse would have sufficient assets in their own account to fund retirement upon the first spouse’s death.
  • Proper Withdrawal Plan. Building up your retirement savings is only one aspect of your retirement plan. You should have some idea of which account or accounts you will be using first for retirement expenses. This will depend on the types of investments you hold. For example, the long-term effects of withdrawing from a traditional IRA versus a Roth IRA could be significantly different.
  • Remember that because you can’t directly transfer funds from one person’s retirement account to another person’s account (except in cases of death or divorce), it’s important for both individuals to have accounts in their own names.

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    One Response to “Advice on How to Stay Happy Together With a Joint Retirement Plan”

    1. Christine Gurney says:

      Excellent article!  I’d also add for high wage earners to consider if they are likely to get a refund if they contribute the max to their 401(k) plan.  Their spouse may be in a safe harbor plan or may not need to worry about refunds for other reasons.

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