Planning for retirement is a crucial step that couples should take together to ensure they are aligned in their goals and expectations. By discussing and reaching agreements early on, couples can create a retirement plan that meets both their dreams and needs. It is important to note that relying solely on Social Security may not be enough to sustain a comfortable retirement, so it is advisable to have multiple sources of income.
To align their retirement goals, couples need to make several decisions. Without prior discussion, each spouse may have different ideas about what they want to do during their non-working years. One spouse may have a desire to travel the world, while the other may prefer to relax at home. Similarly, one spouse may want to keep their current house for family visits, while the other may want to downsize and move to a different state. Additionally, individual hobbies or business aspirations may need to be taken into consideration.
When it comes to retirement savings, individual retirement accounts (IRAs) play a significant role. It’s important to note that only one person can contribute to a single IRA, and they must be employed to do so. However, if both spouses are working, they can each have their own IRA and maximize their contributions. In cases where one spouse is not employed, a spousal IRA can be created. This allows the employed spouse to contribute to an IRA in the non-working spouse’s name, as long as they file taxes jointly and do not exceed taxable compensation limits.
The rules for traditional IRAs, Roth IRAs, and spousal IRAs are generally the same. The contribution limit for 2024 is $7,000 for individuals under 50, with an additional $1,000 allowed for those 50 and older. If both spouses have IRAs, they can contribute up to a total of $16,000. It is also essential to name the spouse as the beneficiary to ensure access to funds in case of illness or death. Required minimum distributions (RMDs) must start by April 1 of the year when an individual turns 73, with a deadline of December 31 each subsequent year.
To reduce taxes during retirement, couples can consider rolling over some of their retirement account funds into a Roth account, such as a Roth IRA or Roth 401(k). While taxes must be paid on the rolled-over amount, this strategy allows for tax-free withdrawals in the future. It’s worth noting that Roth accounts do not require minimum distributions and can be kept for as long as needed. However, if the account is inherited, it must be depleted within ten years. Contributions to Roth accounts have income limits, with singles and married couples filing jointly having different thresholds.
Claiming Social Security benefits is a crucial decision that should be carefully considered. In general, it is beneficial to wait to claim Social Security, as monthly checks increase the longer you wait. However, benefits for surviving spouses are determined by when the wage-earning spouse claimed benefits. If the income-earning spouse dies, the surviving spouse’s benefits will not increase unless they have also earned wages and accumulated enough credits. Individuals who are sick and not expecting to live long may choose to collect Social Security benefits early to help cover medical expenses and potential funeral costs.
Long-term care is an important aspect to consider in retirement planning. Fidelity estimates that after the age of 65, couples will spend at least $315,000 on healthcare. Couples must decide whether to purchase long-term care insurance, recognizing that Medicare does not cover it. Medicaid can provide coverage, but it requires spending down assets before applying. Some life insurance policies offer a long-term care rider, which can be a more affordable option. When funds are needed for medical care, this rider can help cover costs related to nursing homes, assisted living, and private nursing care. However, not all life insurance companies offer this option, so it’s important to explore different policies.
In conclusion, aligning retirement goals between couples is crucial for a successful retirement. By discussing and making decisions together, couples can ensure that their retirement plans meet their expectations. Seeking advice from financial advisors or estate planners can provide valuable guidance in achieving desired outcomes. It is important to note that the information provided here is for general informational purposes only and should not be considered as personal financial advice.
