Does your spouse or partner know how much money you have in your retirement accounts?
Does he or she know about your investing strategy?
Have you discussed your expectations for retirement—when, where, and what—with your partner?
Have you worked together to determine how to reach your retirement goals?
In case one of you died or became incapacitated, do you both know where and how to follow up on all retirement paperwork?
If you have a spouse or partner and answered “no” to any of those questions, you need to sit down, crack open a bottle of wine, and have a romantic night of retirement planning.
First, talk about your retirement expectations. Together you can decide at what age you hope to retire, where you hope to retire, and what you want to do during your retirement years. Remember to talk about travel plans, housing plans, hobbies, health, and other family. Think of anything and everything on which you may want to spend money.
Next, dig out information about all your retirement investments. Review the current balances with each other for every retirement account. It’s helpful to create a spreadsheet, or even a written list, containing all the account numbers and pertinent contact information for each retirement account. While you’re at it, be sure the beneficiary designations for your retirement accounts are all correct.
Last, create a retirement strategy together. Within the strategy, you should have a plan for increasing your contributions regularly and adjusting your household budget to fit those larger contributions. Also include your investing strategy, including your asset class allocation and fund choices.
For many couples, this is enough.
Then again, some people need more.
If you feel more comfortable with more joint planning, there are additional steps to make retirement planning a joint endeavor.
Start with budgeting software or an online budgeting tool (mint.com, iBank, and Quicken are three options) to track your bank account expenditures and place them in categories. Seeing where your money goes will allow you to (1) cut costs if you need and (2) create a retirement budget so you’re closer to understanding your retirement income needs.
After you’ve put together your “retirement budget,” you’ll need to figure out how you’re going to reach your goals. The first step is your investing allocation—the percentage of your accounts that go into each asset class—should be based on your timeline to retirement, your risk tolerance, your investing preferences, and prevailing market conditions. Decide whether you want to establish a joint asset class allocation, based on your collective situation, or individual allocations.
Knowing how much money you’re scheduled to save over time and how investments from your allocation have historically performed, you can estimate if you’re on track to reach your goals. There are online calculators to help you figure your possible monthly or yearly income based on your information.
The last thing you need to do is to compare your progress to your goals. If your future income and your retirement expectations don’t match, something has to give. Consider tweaking your budget to contribute more to retirement accounts, postponing retirement by a couple years, working part-time during retirement, or changing your retirement expectations.
Your first retirement planning date was so rewarding you won’t mind setting a calendar reminder to update your allocations and rebalance all your retirement accounts quarterly or twice per year. Then, once a year, have another retirement planning date to look at the big picture and track your progress.
Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.