How Much Do You Need For Retirement? Communication Is The Key

How Much Do You Need For Retirement? Communication Is The Key

September 2016

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I’m always amazed at how little couples talk about money. It’s probably one of the last taboos.

Communication is essential in saving. If you don’t discuss it, you’ll probably come up short in retirement.

Why talk about money? Two heads are better than one. If two people are saving, it’s a joint effort that works best to bolster a nest egg.

The process is pretty simple. The more ideas that are put on the dinner table for saving, the more you can save. It’s a project and each partner can monitor — and encourage — the other.

The reality, though, is that many couples don’t communicate all that well on money issues. Here are some findings from a recent NerdWallet survey:

  • One in three Americans in a relationship (33%) report that neither they nor their partner are saving for retirement.
  • Among the 36% of Americans in a relationship who report that their partner is saving for retirement, roughly one in five say they do not know how much their partner contributes to long-term retirement accounts (23%) or have even a general sense of the total value of their partner’s retirement account (21%).
  • Of the 14% of Americans in a relationship who have been saving for retirement and have a brokerage account, more than two in five (43%) say they do not consult with their partner before making trading decisions on their brokerage account.
  • Despite the absence of tax breaks and availability of investments with higher potential returns than cash, more Americans in a relationship use a bank savings account for their long-term retirement funds than an IRA (31% vs. 25%, respectively).

Yikes. How do we reboot our relationships with money? Here are some ideas:

If you talk about money as if it were a sports event or a movie, that will ease the anxiety level. What are the highlights? What are the low lights?

Reward yourself when you reach a goal. If you manage to cut spending by $100, save an equal amount in a retirement plan.

Pay yourself first. Before you even consider spending money on non-essential items, sock the money away in a 401(k) plan. Make it automatic.

Look down the road. Do the math to see how much little savings add up over time. Saving $50 at 6% annual rate of return will add up to $50,000 after 30 years. Boost that to $300 a month and you’ll have more than $302,000.

Break down your savings goals. It’s more painful to look at annual amounts. That $300 monthly example above is only $75 a week. And you compound your returns in a tax-deferred account like a 401(k) that will reinvest any gains.

Also avoid the mistake that too many retirement savers make: Avoid bank savings accounts. Right now most of them are losers after you subtract inflation. You can beat those returns by investing in mutual funds that mix stocks and bonds, the staples of most 401(k) plans.

“Protecting your money against inflation is critical, particularly with banks paying such low interest rates on deposits these days,” the NerdWallet study found. “By playing it too safe, couples run the risk of their money not keeping up with consumer prices, severely shortchanging themselves when they enter retirement.”

 

This article was written by John Wasik from Forbes and was legally licensed through the NewsCred publisher network.

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