Couples: Retirement Hot Potato!

The top three issues couples have are about sex, money and power. So today I’m going to write about money, specifically retirement. So much of the help you get from having a certified financial planner (CFP) is the same as having a couple therapist: you get a neutral third party who has only your best interests — and the best interest of your marriage — at heart.

Retirement is a huge life transition, not just financially, but in terms of how you spend your time. What will you each do, separately and together? It can take around 18 months to adjust to retirement.

I received an article about a study from NAPA Net (a pension-related organization) about the disconnect couples have about their retirement: how much money they need, how much money they have for retirement, when to retire, etc.

So I met with a friend of mine who is a CFP, Ariadne Horstman, to get her opinion about what I read in the article. Please note that earning a CFP is a strenuous process of study and exams.

Ariadne shared an amusing story with me: She did the financial plan for herself and her husband, but scheduled an appointment with another CFP. After she and her husband finished the meeting he felt informed and in agreement with the plan — which he would not have if it weren’t done with a neutral third-party.

On to the article: The NAPA Net study states, “. . . more than half (54%) of couples differ on how much should be saved by the time they reach retirement to maintain their current lifestyle. Nearly half (49%) said they have “no idea” of how much should be saved — including 46% of Baby Boomers at or near retirement.” Ariadne agrees with these numbers based on what she’s come across in her practice. She also agrees to this statement: “Couples that use an advisor were found to be more likely to agree on their vision of retirement, which includes both partners fully retiring from their careers and not going back to work, either by choice or necessity (40% versus 31%). In addition, the study found that more couples with an advisor agree that it is not difficult to start a conversation about a range of topics, compared to those that don’t use an advisor.”

“Couples who work with an advisor plan as a team, set mutual goals and objectives, and increase their wealth. Having a neutral third party psychologically helps couples work toward their shared goals,” says Ariadne.

Less Stress or More Freedom?

“The study also revealed that couples reportedly want less stress in their lives. When asked whether they would rather have their other half work in a job that stresses them out but pays a lot or have them be happy at work but earn less, 86% of couples prefer the stress-free path, even if it meant less cash flow.”

Ariadne says, “It’s important to focus on being happy now. Less stress and less money is a choice many people make. Find balance. Live a fulfilling life now, responsibly, as long as you are on track to meet reasonable goals, not just living for today and not saving.” She definitely doesn’t agree with just living for the future and being miserable today either.

Ariadne goes on to say that people in Silicon Valley are all over the map as far as their decisions about working more now so they can have more in retirement. This of course requires couples to have less time together in the years in which they’re earning well. She also notes that couples in the Bay Area may be earning $300-500K, but are spending at a rate that still leaves them stressed.

Part of planning for retirement is your savings but think about your spending, too. I call this playing good defense. Do you have a budget? Do you stick to it? Do you think you earn enough so you can just spend? Does spending make you happy? Are you spending to fill some hole in your life? Some of these money questions may be addressed in couple counseling.

A huge stress for couples in retirement is paying for health care. Another financial stressor is paying off student debt. It’s critical to work on paying down education debt. The most dangerous debt is credit card debt. With the outrageous interest rates, the amount you owe just rises at a dizzying pace.

Ariadne points out that married people have more wealth than unmarried people, even if you’ve been cohabitating long-term. It’s possible that’s due to married couples having joint financial goals. But the reasons are unclear.

Should you retire at 65? Ariadne thinks many people will live a long time, so rather than completely retiring at 65, slow down and work less so you have money for the many years past your full time work life.

Some people think they are doing great financially, but they’re not. Others think they won’t have enough money for retirement yet they’re doing fine or even have more than enough. This is why it’s important to have a financial planner. You want to have a clear path that you both understand, agree to, and actually work at.

David Meyers, CFP, advocates planning together but retiring at different times. He writes: “. . . keeping one paycheck (especially if employer-sponsored benefits are part of the equation) can make a big difference in the long run. To ease into a less rigorous working schedule while still benefiting from an income, one or both spouses can consider switching to part-time or consulting work.” He says that retiring separately can help each spouse navigate the retirement transition in their own way.

So how do you find a good financial planner?

– First go to The National Association of Personal Financial Advisors, to find a list of CFPs. In order to participate, the CFP must be a fee-only provider (in other words, they don’t get any commissions).
– Make sure you like your CFP.
– Ask how they get paid. Make sure s/he is a fiduciary, meaning s/he has their clients’ best interest in mind, not their own profit. Surprisingly, in this industry advisors are not required to be a fiduciary and some types of advisors are only required to present investments that are Suitable for their clients but not necessarily the lowest cost or in the best interest of the clients as opposed to the advisor.
– Do a broker check (these are disclosures such as a bankruptcy in their past).
– Ask for references.
– Ask your friends for a reference to a CFP.

What should you be looking out for?

Watch out for hidden costs at big brokerage houses. These can be commissions, trading fees and more, and if you’re not paying attention can add up to 10% of your investments! Yikes. There’s a very damning article on the New York Times website Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

The bottom line? Make a plan. You can start one yourself, although many couples are busy and may not do so without an appointment scheduled with a CFP. Start saving toward retirement as young as you can. Set goals and objectives. Get more comfortable talking about money. You can begin a broad conversation about finances with a therapist; for the nitty-gritty planning, see a CFP.