Retirement can be a pretty scary thing when you’ve spent most of your life focused on your career. You might even worry about how your relationship will change with your partner when you’ll have so much more time to spend together. But it doesn’t have to be so scary! Keep reading for tips on planning for couples retirement.
Communicate
The most important thing to do when planning for retirement with your partner is to communicate with them. When it comes to retirement, many people have different wants and needs. It’s up to both of you to figure out what those are. Should they be different from one another’s, try to find ways in which you can reach a compromise. Questions to ask yourselves include:
How do you want to be living during retirement?
- Would you rather put your money towards travelling?
- Would you rather put more money towards your home?
- Do you dream of spending your years in a country home or a condo downtown?
What are you willing to give up?
- Would you be willing to give up on having two cars?
- Would you be willing to live in a smaller home?
- Would you be willing to give up on travelling?
What do you want to be doing?
- Do you want to spend more time learning different skills (pottery, painting, boating, etc.).
- Do you want to live near your family so that you can help take care of your grandchildren?
It’s crucial that you both think of these questions before your retirement, so that any disagreement you may have won’t come as a surprise and you can learn to work through it. You’ll also know exactly what to expect of your partner and what they wish to be doing with the extra time that they have on their hands.
What are your guaranteed income sources?
The second most important thing to do is to draw up a list of all of your guaranteed income sources. It is only by drawing up a list that you will be able to budget accordingly. In Canada, there are a few sources of retirement income that you can access. There are government benefits, employer pensions and personal investments/savings.
There are different kinds of government retirement benefits you can have access to. The most common are Old Age Security, Canada Pension Plan (or Québec Pension Plan —QPP— in Québec), and Guaranteed Income Supplement.
When it comes to employer-sponsored pension plans, there are two main types: defined contribution plans (DCP) and defined benefit plans (DBP). Defined contribution pension plans involve paying a set amount each year into the plan, but not knowing how much you’ll get in return. This is because it’s like an investment account with tax benefits — it will grow over time, but there’s no real way of knowing exactly how much. Defined benefit pension plans, on the other hand, involves your employer paying you a regular income after you retire. Personal investments are the investments and savings you’ve made throughout your life for the sole purpose of using it during retirement — like RRSPs, Tax-free Savings Accounts (TSFAs), and Annuities.
Think about whether you should retire at the same time
You might think that retirement is something to look forward to. After all, you’ll never have to work again and you’ll have all the time in the world to focus on your relationship and activities you’re really interested in. But that’s not always the case for most people.
Retirement can be a complicated process — you’re dealing with letting go of the one thing you spent the majority of your time on. It may feel as though you’re giving up on a huge part of your identity. You may not know what to do with your time anymore, and it might put some strain on your relationship. If you’re not used to spending the majority of your time with your partner, it may be a good idea to retire separately.
Separate retirements for couples can allow each party to deal with the process of loss. By retiring separately, you’ll both have enough time to find a new sense of identity. You’ll also have time to figure out how the majority of your time will be spent. If you both try to figure these things out at the same time, frustrations and tensions can arise when one of you doesn’t know what to do.
However, if you already have a plan and know exactly what you want to be doing, retiring together can be a good option. It’s also a good option for couples that worked from home, since they’re more used to spending their days together. The difference is that you’ll both finally have enough time to relax and unwind, while doing activities you both enjoy.
Budget
After communicating your needs, drawing a list of your guaranteed income, and figuring out whether you want to retire at the same time, creating a retirement budget is of the utmost importance. This is what will ensure that you are spending your money wisely. After all, you don’t want to be spending the rest of your days stressed about your debts and cash flow.
When planning for retirement, the general consensus is to follow the 70% rule. This means that you should budget for an income that is 70% the amount of your regular income. The 70% rule ensures that you won’t be making too big of a lifestyle change once you hit retirement. In short, it makes the process a lot easier to deal with.
In order to make the best budget possible, use Allevia’s online budgeting tool. This tool not only analyzes your financial situation, but it also gives you personalized advice if you’re struggling to make ends meet, provides you with solutions to achieve your goals, and helps you keep track of your progress so that you can live without the burden of financial hardship.
