Preparing Your Finances as an Elderly Couple

Whether you’re well into the golden years or retirement is on the horizon, here are three areas to consider when preparing your finances as an elderly couple.

Retirement Accounts

While many couples choose to combine their checking or savings accounts, it’s not possible to combine a 401(k) or individual retirement account (IRA). This is actually a net positive for IRAs, because it means both spouses can continue to make the maximum annual contribution and, in effect, double their collective retirement savings. In 2022, the maximum contribution for IRAs is $6,000 per year for people under 50 and $7,000 per year for people 50 and older.

For both 401(k)s and IRAs, you can start making penalty-free withdrawals at age 59½ and you are required to start mandatory withdrawals at age 72. Many elderly couples decide together how to manage their withdrawals, keeping in mind that the more time money stays in an investment account, the more opportunity there is for value to increase. There are also tax considerations to be made: if one partner has a Roth IRA and the other has a traditional IRA, it might be advantageous to start withdrawals on the Roth account first, while one or both spouses are still working. This could help to avoid being pushed into a higher tax bracket, as withdrawals from traditional IRAs and 401(k)s are treated as taxable income.

Another aspect of retirement accounts to consider is spousal beneficiaries. It is possible to name your spouse as a beneficiary on any retirement account—which is something most elderly couples choose to do. This ensures that in the case of a death, the surviving spouse will inherit those retirement funds.

Estate Planning

The process of planning what happens to your assets after you die is extremely important for elderly couples. Hopefully, by the time you reach retirement, you and your spouse already have some kind of estate plan laying out who will inherit your things and documenting directives around medical care, power of attorney and so on.

For couples, it’s also important to discuss and check up on the beneficiary status of each other on bank accounts and life insurance policies. Some couples prefer to name their spouse on most accounts, while others may name their children. Either way, make sure that designations are up to date—especially because a legally designated beneficiary may take precedence over what’s written in a will.

As with any serious financial matters, estate planning should involve a trusted, qualified estate planning attorney. This person can help to explain the various legal and tax considerations around making a will and designating beneficiaries. They can also help with lesser known issues that elderly couples may face, such as how to prepare for healthcare costs and engage in Medicare planning to ensure uninterrupted care in a way that’s financially sustainable.

Financial Management

As we age, our financial priorities change. It’s important for elderly couples to discuss how finances will be managed around the time of retirement, and beyond.

A good place to start is by working together to list all your assets: both liquid (like checking and savings accounts) and non-liquid (your home, cars, investments and so on). Next, map out what funds will be coming in during your retirement. This might be passive income from investments, withdrawals from 401(k) or individual retirement accounts, and so on. Finally, predict how much you plan to spend monthly and any big expenses you foresee in the future, such as medical needs or travel. With all of this information clearly laid out, it will be easier to see what financial challenges and opportunities lay ahead, and how to best prepare.