Planning for retirement is a crucial undertaking that can span many years, and the decisions you make during this period will significantly impact your financial stability, lifestyle, and legacy in your later years. It’s essential not to take these decisions lightly or delay them. Moreover, if you have a partner, it’s vital to involve them in the decision-making process.
Achieving a successful retirement that aligns with your desires and expectations requires careful consideration, effective communication, and compromise with your spouse or partner. To help you navigate this journey, here are seven pivotal questions to address together during the “pretirement” phase – the period when retirement draws nearer, and your career is in its later stages.
#1 What will be the retirement timing for each of you?
One of the most significant choices is determining when each of you plans to retire. Do you both intend to retire simultaneously to enjoy this new phase together or does one of you plan to continue working a bit longer? The decision regarding retirement timing can have various positive effects on your financial well-being, among other factors.
Average retirement ages in the U.S. are around 64.7 for men and 62.1 for women, but these numbers may not suit your unique circumstances. Factors such as your age, career satisfaction, pension eligibility, and Social Security options will impact your retirement timeline. Openly discuss your retirement aspirations with your partner and find common ground if your preferences differ significantly. Keep in mind that unexpected factors, such as health issues or other unforeseen challenges, may influence your retirement timing.
#2 Where do you envision retiring?
During the pretirement phase, decide whether you want to continue living in your current location or explore the idea of relocating for retirement. Assess your satisfaction with your current home and neighborhood and discuss whether you’ve dreamt of living elsewhere, such as in a beach town or golf community. Additionally, consider proximity to family members, particularly children and relatives.
If you’re considering a move, research potential retirement destinations together and visit them to gain a better understanding of what living there would be like. Investigate the tax implications of residing in different states, choose the type of housing that suits you (apartment or house, rental or owned), and determine your budget. This relocation decision will significantly shape your retirement experience, so weigh your options thoughtfully.
#3 What are your retirement lifestyle goals?
While planning for retirement, people often focus on saving, housing choices, and maintaining their standard of living. However, it’s equally important to consider spending on activities that bring you joy and fulfillment. Discuss what you envision for your retirement lifestyle, whether it involves frequent travel, pursuing new hobbies, supporting grandchildren financially, or undertaking home renovations. These preferences will influence your retirement income needs.
Create individual lists of your wishes and compare them. Identify common interests and areas where compromise may be necessary to establish a shared vision for your retirement lifestyle. This shared vision will guide your retirement budget and help determine your ideal retirement location.
#4 When will you both start claiming Social Security benefits?
Making the right decision about when to claim Social Security benefits is crucial to your financial well-being. You can receive your full retirement benefit, calculated from your earnings history, when you reach full retirement age. Claiming benefits as early as age 62 is possible but results in a reduced monthly payment, while delaying past 67 can lead to an additional 8 percent increase for each year until you reach age 70.
Consider factors such as your age difference, health, life expectancy, income needs, and more when determining the optimal age for both of you to claim Social Security. If one spouse earned significantly more than the other, explore the potential use of spousal benefits to maximize your combined Social Security income.
#5 How much do you plan to allocate for children and grandchildren?
Many retirees anticipate providing financial support to their children, grandchildren, or other heirs. Have a conversation about the amount of support you wish to offer, the specific ways you intend to assist them, and the duration of this financial assistance. Consider whether you plan to contribute to education expenses, weddings, home down payments, family vacations, or establish a trust.
While supporting loved ones can be fulfilling, ensure that it doesn’t jeopardize your own retirement security. If you have diligently saved for retirement and can comfortably afford it, contemplate using a portion of your retirement savings to create lasting memories with your family.
#6 How will you plan for and cover healthcare expenses?
Medical costs in retirement can rise significantly, making it essential to assess your current health status, family medical history, and budget for both expected and unexpected medical expenses. Discuss strategies for saving and budgeting for healthcare costs, considering potential future increases.
Explore steps you can take now, such as focusing on a healthy diet, staying fit, and preventive care, to potentially reduce future healthcare expenses. Take the time to understand your healthcare options when you turn 65 and become eligible for Medicare, including what it covers and whether a Medigap or Medicare Advantage plan would be suitable.
#7 How will you address long-term care needs?
Having open conversations about long-term care is important as you age. It is estimated that 70 percent of 65-year-olds will require long-term care during their lifetime, ranging from personal or medical services at home to assisted living or nursing home care. These services can be costly, so it’s essential to plan ahead.
Discuss your preferences in case one or both of you require significant care in retirement. Consider options such as in-home caregiving versus moving to an assisted living facility. Explore long-term care insurance as a means to cover future needs, as many private health plans do not include long-term care coverage. Taking care of this topic will make you both feel more at ease.