Retirement Tips for Young Couples

Young adults have a lot going for them like the optimism of youth, a bright future ahead, and hopefully a successful career of their choosing. But one of the greatest things they have in their favor is time, especially when it comes to retirement planning.

Getting an early start has immense benefits when you consider the amount of time for your investments to compound and accumulate wealth for your later years.

This is true, particularly in the case of Millennial couples. You might know your sweetheart’s favorite song, movie, and the comfort food that will always make her smile. But do you know how much she has in a 401(k)? What about the mix of stocks and bonds across all your investment accounts? Looking far ahead, do you have an idea of when and where your spouse wants to retire, or where she dreams of spending time after leaving the workforce?

Unfortunately for most couples, the answer to those questions is, “No.” That’s probably because couples tend to avoid conversations about money since it seems to be a source of arguments. In fact, couples fight about money twice as much as they fight about sex, according to a Money Magazine survey.

Given the general financial circumstances of your average young couple, it makes sense though. Retirement is decades away, and some people feel that they simply can’t stash away much retirement saving because of budget constraints.

A lot of Americans in their 20s and 30s are struggling with modest incomes, expensive rents, and perhaps also making plans to buy a house and start a family, not to mention student loans (the average college grad with debt carries a $28,950 balance).

Fortunately, there are available options for getting a head start on your retirement savings. Many employers automatically enroll new hires in a 401(k) plan, which sends a chunk of your pay into savings before you can get accustomed to having it in your wallet.

But the most common auto contribution, 3% of pay, isn’t enough to build a livable nest egg. Get in the habit of raising your contribution by at least 1% of pay a year. Your employer may make that easy. At 75% of plans administered by Fidelity, workers can sign up for such scheduled boosts.

And in the case of an employer-matched contribution program, the more you contribute to your account, the more your employer will match, which is free money to you. It would be a lost opportunity if that weren’t taken advantage of.

In the case of a married couple, you want to be strategic about how you contribute to your respective retirement funds. By directing more of your 401(k) dollars to the account with the bigger payoff, you can maximize your benefits.

That might translate into maxing out the dollar-for-dollar match in your spouse’s plan before contributing to your own 401(k), which might offer 50¢ for each $1. For two 25-year-olds each earning $50,000 a year, being clever with one year’s 3%-of-pay contribution could add up to $8,700 at retirement.

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC