As we continue our series of articles on money in relationships, we come to a crucially important time in the financial life of every person – retirement and beyond.
Most people have a working life of between 30 and 40 years, and when this time has passed it is vitally important that we’re able to retire comfortably. Unfortunately, with taxes, easy access to credit, and the high cost of living, many people find themselves unable to afford a good quality of life when they stop working. Whether you’re close to retirement age or still in the early stages of your career, it’s important that you plan carefully for your later years.
Retiring as a couple
Couples who are a similar age should expect to retire within about 5 years of each other. Two pensions are always better than one, but how should couples deal with their finances before and during retirement?
Many couples are faced with a stark reality – one person may have earned more than the other throughout their working life and may have a lot more capital invested for retirement than the other. Surprisingly, it often happens that the person who earned less ended up saving and investing more and becomes the “richer” of the two after retirement – here are some financial tips for retired couples.
Share expenses as equally as possible
Ideally, the only expenses a retired couple should have are day to day items like groceries and lifestyle expenses like luxury cruises and rounds of golf. However, retired couples should be careful to split their expenses equally so that a surplus can still be created each month.
Pay off any existing debt
Whether this is a small bond, credit card debt, or car payments, a retired couple should have no major debts outstanding when they stop working. Ideally, every couple should retire with a paid-off home, a reliable vehicle, and enough money invested to cover their monthly expenses. A small surplus should be re-invested each month to cover inflation.
Keep health insurance active
It’s possible for retired people to retain their health insurance and disability policies after they stop working, depending on the insurer they are with. Before you retire, speak to your financial planner about the cost of medical expenses in old age and try to keep your health insurance as long as possible.
Make sure wills are in order
As unpleasant as the thought may be, retired couples may have to deal with the prospect of one partner passing away before the other. Couples should ensure that their wills are in order and that the partner who is left behind will be able to live comfortably on their own retirement capital if necessary.
- Are our visions aligned? If you are the company’s founder, you’ll need to be very sure that your partner is on the same page as you when it comes to running the business and achieving your goals.
- Can I give control to my new partner? Are you willing to trust your business partner with important areas of the business, or will you be second-guessing them?
Defining roles in a partnership
One of the most important things that any business partners can do is sit down and discuss the role each of them will play in the company. Partners who have different skills and strengths should align these with their roles in the business so that each person will bring their best to the company. It’s important to write this down in a formal document to prevent any conflict in the future because of a misunderstanding.
As the business grows, partners should be open with each other about how they see the future of the company and what role they would like to play in it. Some business partners struggle to make the transition from small to large companies, and if a partner has reached a stage where they would like to move on, this should be managed very carefully so that no damage is done to the running of the business.