What Does Your Retirement Look Like?

When you envision your retirement, what does it look like?  Are you playing golf?  Traveling the world?  Sitting in a recliner in front of the umpteenth season of “American Idol?”  Still working?  And, perhaps most importantly, does your spouse share the same vision?

All of these questions are crucial – they’ll help you map out how much, exactly, you need to save – but that last one seems to be the sticking point for a lot of people, at least according to a new study from Fidelity.  Their research found that couples aren’t seeing eye to eye on a lot of these issues.  For example:

• One-third don’t agree or don’t know where they plan to retire
• Two-thirds don’t agree on their expected retirement ages
• Nearly half don’t agree on whether they’ll continue to work in retirement

This, as you can imagine, is a problem, particularly because Fidelity’s survey focused on married couples, age 46 or older – in other words, many people who are right on the brink of retirement.  Time is running out.

If you and your spouse aren’t on the same page – or you haven’t had these discussions at all – this is your wake up call.  It’s never easy to talk about money, which is why I’m giving you some pointers below.  But it’s up to you to eat your peas, as President Obama said recently.

• Use the news as a doorway.  Starting a tough conversation is generally the hardest part – you might find that the words flow from there.  So use current events (or even this column) as a segue.  Kathleen Murphy, president of Personal Investing at Fidelity, says one of the most surprising things about the study, to her, was that the financial crisis we just lived through didn’t generate more conversations.  It was a missed opportunity, but one you can still capitalize on.  If your spouse handles the finances (and we’ll talk more about this in a bit), mention that you’re interested in knowing how your accounts faired during the recession, and how your retirement plans might need to be adjusted as a result. Turn that into a discussion about what your hopes for retirement are.

• Do a quick exercise.  This comes by way of Rick Kahler, a financial planner who regularly hosts workshops to help couples talk about money: Take some time, independently, to write down what a typical day in retirement looks like for you, then compare what you’ve written together.  “If they’re vastly different, it’s time to talk a little more,” says Kahler.  Pinpoint your differences and talk about what’s behind them.  Maybe he wants to live on the beach, you want to stay put.  But what does living on the beach mean for him?  Relaxation? Seclusion? And what does staying in your current home mean for you?  Once you have your answers, see how you might produce those feelings through a lifestyle that meets both of your needs.

• Compromise.  One of the bigger issues uncovered by the Fidelity study was differences in investment style:  Women tend to have a lower risk tolerance, and therefore like to invest less aggressively than men.  Kahler says it’s a result that rings true in his marriage. “My wife and I are a case in point. I just re-took our risk tolerance, and I came out 100 – 0 [meaning he’d be comfortable with 100% in equities] and my wife was 40 – 60.  That happens all the time, and the question is, ‘how much do I really need to earn? Is taking the higher risk really necessary?’ We’ll put this into our software, and the lower return often results in a higher probability that the money will last their lifetime, because it’s not as volatile.”  In most cases, the easiest solution is to find some middle ground, a ratio that allows both spouses to sleep at night.  Kahler and his wife have settled on a 70 – 30 mix; yours needs to be based on your age, your retirement plans (namely, how long and whether you’ll continue to work) and your combined ability to take risk.

• Split the work.  Only 17% of the couples in the Fidelity survey were completely confident that either spouse is prepared to assume responsibility of their joint finances if necessary.  That, to me, means that in a lot of cases, one spouse is handling the money, the other has his or her head in the sand.  If having one spouse take the lead on finances is a system that works for you, that’s okay, but the other partner needs to at least know what’s going on.  “I would get concerned with a spouse who seemed to be deferring entirely, or completely detached from the portfolio, or ignoring what’s going on.  It’s important that everyone is aware,” says Kahler.  One solution is to have monthly money chats, used to update each other on the status of your savings efforts and revisit your goals.  The more meetings like this you have – and it’s completely okay if you do it over dinner and a glass of wine – the easier the conversation becomes.

• Enlist some outside help.  If all else fails, and you’ve hit a roadblock, a financial planner can serve as a middleman.  Find one who charges by the hour or plan (as opposed to a commission) through NAPFA.org and acaplanners.org.

With Arielle McGowen O’Shea

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