Credit: Shutterstock photoPairing up has its perks. Everything from tackling household chores to securing hors d’oeuvres at a crowded party is easier when twosomes work as a team. Yet when it comes to planning and saving for their golden years, communication and commitment issues are putting many couples’ future financial security at risk, according to a new Harris Poll survey conducted on behalf of NerdWallet.
The August retirement savings survey asked more than 1,800 American couples either married or living with a partner about what they do financially, behind closed doors — how committed they and their partners are to saving for retirement, what money specifics they share and how they invest when the other person isn’t looking.
Among the results of the survey:
One-third of couples say “I don’t” to saving for the future: One-third (33%) of Americans in a relationship reported that neither they nor their partners are currently saving anything for retirement. Not setting aside money to cover future income shortfalls may leave couples with no choice but to downsize their retirement plans or continue to work well past their ideal retirement age.
Couples shortchange their own savings: While 39% of Americans in a relationship report that they contribute to a workplace retirement account such as a 401(k) (reaping the benefits of tax savings and potential employer match on employee contributions), the second most popular type of account couples use for their long-term savings is a bank savings account. This is despite the lack of tax advantages and severely limited earning power — most bank accounts pay less than 1% interest. More couples say they use a bank account as a parking spot for their long-term savings than an IRA — 31% versus 25%, respectively.
Savings secrets keep partners in the dark: When it comes to revealing money specifics surrounding retirement — like account balances and current retirement savings rates — there’s a lot that couples don’t talk about:
- Roughly one in five respondents personally saving for the future say that their partner does not know how much they contribute to their retirement account.
- Similarly, on the nonsaver side of the partnership, 21% say they lack even a general idea of their partner’s total retirement savings account balances.
- Among the 14% of Americans in a relationship who have accounts with brokerage firms, 43% say they go solo and do not consult their partner before making trading decisions within the account.
- Among survey respondents in a relationship where at least one partner is saving for retirement, 30% say they have not attempted to calculate how much money they will need to retire.
(For the full survey results, see Money Secrets and Sluggish Savings Put Couples’ Retirement Dreams at Risk.)
4 retirement savings tips for couples
Teamwork is a powerful tool for tackling all the challenges couples face, financial and otherwise. To strengthen the bond between partners today and the future chance of a happily-ever-after retirement, NerdWallet recommends that couples:
- Start with the fun stuff: Don’t dive into the dollars-and-cents conversation right away. Ease into the topic by talking about the lifestyle that you envision together. When do you want to retire? Where? Do you dream of pursuing a different kind of work in retirement? What other activities are on the agenda? Moving on to the financial specifics is a lot easier after you both have a clear picture of what the future may hold and are excited about making it happen.
- Calculate future lifestyle costs: Making retirement dreams a reality means sharing the details of your current state of the financial union and figuring out what, if any, adjustments to make now and how much they’ll pay off down the road. Use a retirement calculator and play around with different saving scenarios.
- Max out the potential of every dollar you save: Short-term savings (money needed in the next five to 10 years or less) belong in a savings account. The best place for long-term savings is in retirement plans specifically designed for that purpose. The first savings stop should be a workplace retirement account, at least up to the point of nabbing any employer matching contribution, if available. Next, take advantage of IRAs — Roth, traditional, spousal — which offer tax savings as well as access to investment options with greater potential returns than a savings account. (See NerdWallet’s picks for the best IRAs.)
- Vow to work together as a team: It’s the little, daily acts of kindness that fortify a relationship and help it grow stronger over time. Same with saving for the future, where even the smallest financial gesture — stashing an extra $50 a month in an IRA, for example — compounds and strengthens a couple’s financial foundation. In moments of weakness when the task seems overwhelming or near-term financial temptations too great, remind each other that you’re in it for the long haul — together.
Methodology
This survey was conducted online within the United States by Harris Poll on behalf of NerdWallet from Aug. 10-12, 2016, among 3,068 U.S. adults ages 18 and older, among whom 1,832 are married or living with a partner. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.
Dayana Yochim is a staff writer at NerdWallet, a personal finance website. Email:dyochim@nerdwallet.com. Twitter: @DayanaYochim.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
