Steve and Lee-Ann found their happily ever after, but as they tell it, there were a few detours along the way. The couple first started dating at the age of 13 but were separated when Steve’s family moved to Alberta. Many years later, they reconnected and discovered “the sparks were electric.” 

They aren’t the only ones to find their forever partners later in life: More than one in four Canadians between the ages of 35 and 64 are in their second marriage or common-law relationship.1 Statistics tell us that these relationships often last — half of all couples on their second marriage have been with their current partners for at least 12 years and many of these couples have children together.2

While a second marriage or later-in-life partnership can give you a new lease on life, marrying together your finances and plans for the future can get complicated. After all, people generally enter their first marriages when their careers and savings have yet to mature. Then, life steps in. By the time some couples walk down the aisle a second time, children have been born, investments have grown, divorce may have occurred, and pension saving is well underway. So, what can you do to help ensure your retirement is as prosperous as your relationship? It may not be as difficult as you think.

We spoke to Natasha Kovacs, Senior Financial Planner with TD Wealth, about how couples can make the road to retirement a little easier. Here are some key questions she believes couples should be asking.

What will our retirement look like?

One of the first steps any couple should take when it comes to planning for retirement is to ask themselves: What do we want our retirement to look like? Whether the answer is more time with the grandkids, new hobbies, or frequent travel to Costa Rica, it’s important for you and your partner to be on the same page. During your conversation, you may find that you and your partner have different ideas about what the future holds. Kovacs suggests you may even find these conversations become emotional. After all, we’ve all had different life experiences, and these experiences can affect how we see the future. The key, she says, is to get to the root of the emotions and be transparent with one another.

“When helping a couple plan for retirement, I stress the need to hear from both of them,” Kovacs says. “I look at what goals they have in common, what may be different and how we can prioritize those consistencies collectively.”

Keep in mind, if there’s a significant age gap between you and your partner, or there are differences in how healthy you are, the timing of your retirement may differ. Take the time to discuss what this might mean for you, as well as what it might mean for your retirement savings if one of you were to slow down before the other.

How much money do we need to save?

While there’s no magic number, a planner may start with a rough estimate to help you retire comfortably. A typical estimate might be enough retirement assets to cover 70% of your working income per year, starting at age 65.3 That figure would include investments in Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs), non-registered accounts, Old Age Security (OAS) and Canada Pension Plan (CPP) payments, as well as any employer pension amounts. However, that number can vary significantly and depends on a number of variables, including your goals. Kovacs says couples can begin by taking a close look at their income and expenses. “I typically have clients do a six-month review of their current cashflow and look at those numbers in relation to what their expected retirement expenses will be,” she says.

Steve and Lee-Ann learned they could retire 10 years earlier than expected and you may be surprised to discover that your partnership can give you a leg up, savings wise. For example, with two incomes, couples may have the wealth flexibility to postpone government pensions. Traditionally, a couple may have planned to take OAS or CPP at 65, but thanks to their joint income they may now be able to defer those pensions until age 70. At that age, their total maximum government pension benefits will have increased (you can also defer these benefits as a single person if your retirement savings allow for it).

To figure out how much you and your partner will need to save, it’s often best to meet with a financial planner who can help you sort through the details.

What are we going to share and what will we keep separate?

For couples who marry later in life, Kovacs says cashflow conversations should also involve establishing rules around “what’s yours, what’s mine, and what’s ours.” After all, getting married (even the first time around) doesn’t mean you have to share everything with your new partner, but it should mean that you’re clear about what you will share and what you won’t. For example, you may have an inheritance you’d like to keep separate, or specific investments you’d like to include in a trust for your kids. On the other hand, you may want to set up a shared account that you and your partner can use to pay for things.

Now is also a good time to review any debts or other financial obligations you’ll carry into retirement. These may include pre-existing child or spousal support payments, or a commitment to take care of elderly parents. Kovacs says it’s critical to work through these details now before they could create a problem. “That’s the beauty of building a retirement plan,” she says. “You can avoid these types of surprises.” However, she also cautions that the focus should remain on your future: “I often tell my clients ‘there are no rearview mirrors.’ This is about the journey you’re on together and the exciting future you’re working towards.”

Should we have a retirement tax plan?

Retirement planning should always include a discussion about taxes, and an exploration of the options available. Kovacs recommends couples sit down with their financial planner and a tax professional together to go through those options. Here are a few that might come up.

For starters, income splitting can help mitigate your tax exposure if one of you earns more money than the other. Because our tax system has graduated tax brackets, allocating some of the income earned by a higher-paid spouse to a lower-paid one can reduce the overall tax paid by your family. Income splitting can also be used after retirement, in the form of pension splitting. It’s essentially the same concept, except now the income that’s split is pension income. Overall, both these strategies can prove valuable for those who coupled up later in life because there’s more likely to be a significant age or income gap between partners.

A spousal RRSP is another option. Here’s how it works: The partner with the higher income contributes to their partner’s RRSPs, deferring tax on those funds, and enabling their income to fall into a lower tax bracket. When the RRSP is withdrawn after retirement, the funds are taxed at a lower rate because now it’s the lower-income spouse who withdraws them.

While you can’t contribute to someone else’s TFSA in the same way as an RRSP, a spouse can gift funds to their partner to deposit. This can allow investments and savings to grow tax-free, provided there is ample contribution room.

How can we protect our plan?

No matter where you are in the planning process, don’t forget to ensure that all your paperwork is up to date. Though the task may be less exciting than dreaming of that trip to Italy, it’s important for your documents to reflect your wishes. After all, life is nothing if not unexpected. That means updating your Will, Powers of Attorney and beneficiary documents, but also details around trust accounts and other estate plans. You wouldn’t want to find yourself in a situation where a previous spouse or partner is the sole beneficiary to your estate when you intended for it to be your new spouse. Similarly, if you own a business, now may be a good time to revisit your business succession plans as well.

Overall, retirement planning is an exciting venture, but it can get a little complicated if not executed properly. Sitting down with a financial planner to work out the details can help ensure your retirement is everything you and your partner want it to be.

TAMARA YOUNG

MONEYTALK LIFE

ILLUSTRATION

DANESH MOHIUDDIN