Yours, mine and ours – a couple’s guide to retirement planning

March 28th, 2011 Dick Ockerlander

If you’re entering your retirement years with a spouse or partner, planning is critical.

As a couple, your combined retirement assets are not just limited to what you may have accumulated in your current employers’ retirement plans. You also need to consider any older accounts that are still sitting in former employers’ plans or assets that have been moved to rollover IRAs.

Both you and your partner should inventory your various retirement assets. Next, consider some areas where a joint planning effort may help enhance your investment outcome.

Set a mutual goal

Pursuing the goal of retiring together requires a long-term approach. Start by determining how large a combined nest egg you will need. This will depend on how much you have already saved, when you hope to retire and what kind of lifestyle you hope to lead.

Have an honest discussion with your partner about where you plan to live, whether you plan to maintain more than one residence and what you plan to do with your time. All of these factors will affect your retirement income needs.

Keep in mind that Americans are living longer and that one or both of you could spend 20 or more years in retirement. Also carefully review the potential financial benefits of delaying retirement. Working for an extra few years could enable you to continue making contributions to your IRA or employer-sponsored retirement plan and delay taking withdrawals.

Analyze your asset allocation

As with any investment portfolio, your retirement accounts should work in unison to pursue a single accumulation goal.

Ask yourselves whether your overall asset allocation is appropriate for your combined objectives and risk tolerance. Are the portfolios adequately diversified? Are they over weighted in any one asset class or individual security? Also consider how your retirement portfolios complement your other assets, such as taxable investment accounts and real estate.

Determine your distributions

For couples in or near retirement, an equally important part of the planning process is determining when and how to withdraw money from retirement accounts.

Consider which accounts (i.e., taxable vs. tax-deferred) to tap first. It may be better, for example, to liquidate assets in taxable accounts, allowing assets in IRAs and qualified retirement plans to continue growing tax-deferred.

Remember, however, that with few exceptions, the IRS requires individuals to begin withdrawing money from tax-deferred accounts no later than age 70½, at which point you may want to rethink your distribution strategy. For instance, might it make sense to convert a traditional IRA to a Roth IRA to avoid taking distributions altogether? Your tax advisor can help you consider the tax consequences of conversion, as well as the potential benefits of a Roth IRA.

These are just a few of the issues dual-earner couples need to consider when managing their individual retirement plan accounts. Since no two couples’ financial situations are alike, the best course of action is to make an appointment today so that you can begin devising a coordinated plan for meeting your future financial needs.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior to investing.

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Dick Ockerlander

About the author

Dick Ockerlander is a LPL Financial Advisor at MidWestOne Bank. He specializes in investments and retirement planning.

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