The words “retirement account” and “tax-free income” may not usually get you weak in the knees — that is, until you start daydreaming of all the ways that cash could help you enjoy time with your partner in retirement.
Keeping your romance alive may depend more on compatibility and communication, but a Roth IRA could be the savings vehicle to help power your life together beyond your working years.
Fighting about finances is common, but as couples near retirement, arguments about retirement savings may increase: 47% of couples disagree about the amount needed for retirement, according to a 2015 survey of more than 1,000 couples by Fidelity Investments.
Since each partner brings to the relationship a different attitude about money, it’s necessary for couples to communicate their retirement goals and get on the same page, says Andy Schwartz, principal of Bleakley Financial Group, an advisory firm in Fairfield, New Jersey. He adds, “I’ve watched marriages break up because a husband or wife is so focused on the idea of retirement savings and being financially secure, while the other partner is not focused on that.”
Experts agree you should first max out the company match (if it’s offered) on an employer-sponsored retirement account, like a 401(k), which offers tax-deferred savings. But a Roth IRA allows your contributions to grow entirely tax-free.
You won’t get the benefit of a tax break now, but unlike with a 401(k) or traditional IRA, you won’t have to pay taxes on distributions from your Roth IRA in retirement. That way your money will go toward your living budget — and your partner’s — rather than the IRS.
Use a Roth IRA calculator to find out how much your savings could be worth when you retire.Planning for retirement throughout your relationship
If you and your partner are finding it difficult to reach common ground as you discuss retirement, consider seeking help from a professional financial advisor to evaluate your financial situation and goals, and to come up with a plan that you both can agree to, says Robert Stammers, director of investor engagement at CFA Institute in New York City. “It’s kind of like having a marriage counselor, but it’s a way of having an honest conversation about your money,” Stammers adds.
Retirement is also not a “one and done” conversation, so it’s important to check in periodically with your partner about your priorities in retirement, says Shelly-Ann Eweka, a financial planner at financial services organization TIAA. “Even though 10 years ago your partner said when they retire they want to travel the Andes Mountains, people change and their goals change, so you need to be flexible and fluid,” Eweka says.
And it’s not enough to share your dreams of retirement. You need to take action and keep each other apprised on how much you’re saving over time, too. One in five Americans who have a partner who is saving for retirement say they don’t know how much their partner has in retirement savings, according to an August 2016 NerdWallet survey, conducted by Harris Poll.
It’s never too late to find romance, but you don’t want to wait too long to adequately fund your retirement. By having tax-free money set aside in a Roth IRA, you and your partner could bring the spark back and act a little more like 20-somethings again — except this time around, you’ll potentially have a bigger budget to spend on dates, vacations and activities.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @AnnaHelhoski