You and your partner may be a couple but your retirement savings aren't in sync. You may have made some steady savings and are doing well but your partner is not. He may have saved very little or not started at all, and is focusing on other goals instead.
What steps can you take to help a spouse or significant other boost their retirement savings? lets take alook.
1. Holding regular budget meetings
Sit down together once a week or once a month and talk to your spouse about finances. Discuss savings, spending, income and investments.
“One of my favorite tips is to have a weekly family budget meeting,” says Ron Strobel, a certified financial planner with Retire Sensible in Meridian, Idaho. “Both spouses will sit together for about 10 minutes to review their expenses for the past week, expected expenses for the coming week, savings and income.
“This allows spouses to support each other in reaching their budgeting and saving goals through a structured process on their to-do list each week,” Strobel adds. “It eliminates any surprises when the monthly credit card statement appears and regular meetings can improve the relationship between their family and money.”
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2. Take advantage of the increase
One easy way to boost your retirement savings is to give it a boost any time you get a raise. Keep some of the raise – which you earned – but add the rest to your retirement. This is a good strategy for you and your partner.
“One of the less painful ways to increase retirement savings is to increase contributions every time you get a raise,” says Brian Minogue, a certified financial planner and founder of Cardinal Financial in Madison, Wisconsin. “For example, if your spouse gets a 3% raise, take this opportunity to increase their retirement deferral by 1%. That way they still get a raise in their take-home pay.” And Increase their retirement savings simultaneously.
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3. Make a spousal contribution to the IRA
A spousal IRA contribution is a great way to supplement a spouse's retirement savings when they don't have any earned income of their own.
“Spousal IRAs are the equalizer when one spouse is working while the other takes a career break, perhaps to focus on family life,” says Madison Sharik, a CFA at Maddy Money Management in Pittsburgh. This type of contribution is an exception to the rule that an individual contributing to an IRA must have earned income. “Spousal IRA contributions enable both spouses to continue accumulating retirement assets, even if one of them is not currently earning,” Sharik adds. “The family as a whole benefits from the tax savings.”
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4. Use all retirement options
Make sure you and your spouse understand all of the retirement plan options available to your family and then use those plans to build your retirement savings.
“People often think they can't save in an IRA if they have a 401(k) or 403(b). That's not true,” says Justin Pritchard, a certified financial planner at Approach Financial in Montrose, Colorado. There may be restrictions on taking a deduction or making Roth IRA contributions, but even these options may be available, depending on your income. Make sure you use all available options to add to your savings.
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5. Review account balances
Take time to review your retirement savings with your spouse. Where are each of you today and where do you want to be when you retire in 20 years?
“Sometimes, knowing where you stand can motivate you to save more,” Pritchard says. “If you're short on retirement savings, both of you should know it. This knowledge may motivate everyone to tighten their belt and prioritize saving.
“If you understand what is within your control and what steps to take, you are more likely to reach your goals.”
6. Plan together
The beginning of the year is an excellent time to review your retirement plans with your spouse and decide on a strategy for the new year. How much will each of you contribute in the new year?
“Who plans to contribute the amount to each account?” says Sharik. This is important for tax-advantaged accounts that come with “family contribution limits,” such as health savings accounts. “Based on your game plan, encourage your spouse to set up automatic contributions that happen in the background throughout the year,” Sharik advises. “Paving the path of least resistance and acting as an accountability buddy is a recipe for boosting your family's retirement savings.”
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7. Fix disputes
If you and your partner have different financial priorities, this may affect your partner's desire to save more for retirement.
“One of the main sources of conflict between couples is having different financial goals,” says Jesse Carlucci, a certified financial planner and chief investment officer at Arrow Investment Management in Oklahoma City. “Each person in the relationship may have different priorities, such as saving for retirement, buying a home, starting a business, or pursuing personal interests.
“To address this issue, couples must engage in open and honest communication about their financial aspirations. “Regular discussions can help identify common ground, prioritize goals, and create a joint retirement plan that reflects shared values and goals.
“Compromise and flexibility are key in finding the balance between individual aspirations and shared financial goals.”
Lucy Lazzaroni is a freelance journalist living in South Florida who writes about personal finance, the arts, and nonprofits. Her writing is featured on Next Avenue, Bankrate, MoneyRates.com, MSN, and the National Endowment for Financial Education. She previously worked as a staff writer at Bankrate.
This article is reprinted with permission from NextAvenue.org©2024 Twin Cities Public Television, Inc. all rights are save.
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