Marriage makes life easier in some ways and more complicated in others. That's true for your retirement savings too. Being married means you have a partner to help you save for your future, but you also have to save enough to cover two people's expenses instead of just one.
It's not an easy task, but the following three tips can make it a lot easier.
1. Create a retirement plan together
You and your spouse should have a clear picture of how you plan to spend your retirement. If you haven't talked about that already, now is the time to do so. Think about your day-to-day activities and expenses, as well as any big-ticket expenses you're planning.
Once you're clear on how you're going to spend your time, you need to figure out how much your retirement is going to cost. It's better to be too generous in your estimates than too conservative because you never know what unexpected costs will arise in retirement.
Then make note of how much each person has already saved for retirement and how much further you have to go. Decide how much each person will set aside for retirement each month. You could each agree to save half of the total, but a proportional approach might work better.
If, for example, you want to save $600 per month and one person earns $30,000 per year and the other earns $60,000, the higher earner could save $400 per month while the lower earner saves $200 per month.
2. Use a spousal IRA
A spousal IRA is a great option for households that live off of a single income. It's a regular IRA that the couple opens in the stay-at-home spouse's name. The working spouse can contribute funds on behalf of the stay-at-home spouse, enabling the couple to save more for retirement every year.
But there are a few catches. First, the working spouse must earn enough during the year to cover all the retirement contributions they make to the spousal IRA and their own retirement accounts. Their contributions to the spousal IRA also can't exceed the annual contribution limit. That's $6,000 in 2022 or $7,000 if the account holder is 50 or older.
It's also worth noting that the funds in a spousal IRA belong to the person whose name is on the account, even if the couple later divorces. Hopefully, that won't be an issue, but it's something to bear in mind when deciding whether a spousal IRA is right for you.
If you do decide to open one, you'll have to decide between a traditional and a Roth IRA. Traditional IRAs give you a tax break this year, but then you must pay taxes on your withdrawals later. This is usually best for those who think they're in a higher tax bracket now than they'll be in once they retire.
Those who think they'll be in the same or a lower tax bracket in retirement should consider a Roth IRA. Contributions to these accounts don't give you a tax break this year, but your withdrawals are tax-free later. You can also contribute some money to each type of IRA, but your total contributions cannot exceed the annual contribution limit mentioned above.
3. Have a plan for Social Security
Married people can either claim Social Security on their own work records, if they qualify, or they can claim a spousal benefit on their partner's work record. The Social Security Administration automatically gives each person the larger of the two.
How much each person receives depends on several factors, including their income over their working years and when they sign up. Each person has a full retirement age (FRA) assigned based on their birth year. For most workers today, it's somewhere between 66 and 67. Signing up before your FRA means more years of benefits, but each check you receive is smaller. Delaying benefits, on the other hand, increases the size of your checks until you reach 70, but you'll receive benefits for fewer years.
The right Social Security claiming strategy depends on how long each partner expects to live. Those who don't think they'll make it to their 80s are often better off signing up early, while those who expect to live longer typically get larger lifetime benefits by delaying.
But just because you want to delay doesn't mean you always can. Sometimes, financial pressures force people to sign up for Social Security early even if they don't want to. There isn't much single adults can do about this, but married couples can still get a lot out of the program with the right strategy.
When both partners have earned similar amounts over their lifetime, it makes sense for each of them to delay benefits as long as possible. But if one person has earned much more than the other, it isn't always a problem for the lower earner to claim early. Doing so may enable the higher earner to delay benefits, and then when they sign up, the lower earner will automatically receive a spousal benefit if it's worth more than what they're getting on their own.
Communication is key
If you take the steps above, you should have a solid retirement plan in place. Now it's time to test it out. Each of you should work toward your individual savings goals, and then you should check in after a few months to see how you're doing. If one or both of you are struggling, you may have to rethink your strategy or your retirement timeline.
You should also check in with each other at least once per year after that to make sure you're still on track for your goals. It's OK if your plans change over time. Just find some time to build a new retirement plan to keep you moving in the right direction.
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