Wealth Management Tips for Retired Couples

Wealth Management Tips for Retired Couples

January 30, 2023

Wealth management is a critical aspect of retirement planning for couples in Connecticut, Colorado, and throughout the United States. It involves maximizing financial assets, reducing taxes and financial risks, and preserving wealth for future generations. This Valentine's Day, give the gift of a secure financial future with Agemy Financial Strategies.

Retirement planning as a couple can present a unique set of challenges and considerations. Unlike individual retirement planning, couples must work together to align their financial goals and make decisions that will impact their joint future. Importantly, managing joint wealth. 

Many pre-retirees think managing money in retirement gets a little easier than before. After all, you only have the money you have, so your options are somewhat simpler and more limited. However, the rules of money management shift in retirement so it could be more complicated for the both of you, especially after the turbulent year of 2022. Although overall inflation is starting to cool, Americans haven’t seen much relief in terms of everyday prices such as groceries, which were up 11.8% in December compared with a year earlier. 

With the increased cost of living for us all, it is more important than ever for couples to plan and manage their wealth effectively to ensure a comfortable and secure retirement. 

In this blog, we will explore why wealth management is an important aspect of retirement planning, and how it can help couples achieve financial goals, focusing on our residing and practicing states of Connecticut and Colorado.

Here’s what you need to know.

Create a Budget

When creating a budget for retired couples in Colorado and Connecticut, it is important to consider the unique financial challenges and opportunities that come with living in these states.

One of the biggest expenses for retirees in Colorado and Connecticut is healthcare. The average cost of healthcare in Colorado is $8,289 per person. The average cost of healthcare in Connecticut is $12,754 per person. And when you factor in long-term care costs, the numbers get even more eye-watering. Someone turning age 65 today has about a 70 percent chance of needing some type of long term care during their lifetime. While one-third may never need long term care, 20 percent will need it for longer than 5 years. The average length of time people need long term care services is 3 years.

In Connecticut, the average cost of nursing home care is approximately $462 per day, or $168,700 annually, according to the Connecticut Partnership for Long Term Care in its most recent quarterly update and recent annual studies.

In Colorado, the same care will cost $116,709 per year, and it's projected to $632,367 annually by 2042.

There are ways you can try and combat high costs, such as purchasing long-term care insurance, contributing to a health savings account (more on this below), or setting aside funds to cover medical expenses.

Another important factor to consider when creating a budget is the cost of living in Colorado and Connecticut. In 2023, Connecticut’s cost of living index was 115.4 making it 15.4% higher than the national average. Colorado’s cost of living index is 120.5, 20.4% higher than the national average.

It is important to budget for housing, utilities, food, and transportation. Another factor to consider is any planned or anticipated expenditures, such as travel in retirement or home repairs. By considering these factors and creating a comprehensive budget, retired couples can ensure that they are making the most of their retirement savings and enjoying a comfortable retirement.

Maximize Your Joint Retirement Income

Maximizing retirement cash flow as a couple requires careful planning and management of your financial assets. When it comes to your big-picture finances—such as getting the most out of your retirement plans, coordinating strategies is a must:

Retirement Accounts: Couples in Colorado and Connecticut can maximize their retirement savings by making the most of their retirement accounts, such as IRAs and 401(k)s. This may include contributing the maximum amount allowed each year, or rolling over old retirement accounts into a new account to take advantage of higher interest rates or lower fees. As a couple, you need to coordinate your retirement accounts and plan how you will access your funds in retirement. This may include consolidating accounts, reallocating investments, or creating a joint investment strategy.

Tax-Advantaged Accounts: There are several tax-advantaged accounts available in Colorado and Connecticut, including health savings accounts (HSAs) and flexible spending accounts (FSAs), that can help retirees further reduce their tax liability and maximize their retirement savings.

HSAs offer a number of benefits beyond spending for the short-term, such as saving for longer-term qualified medical expenses, including those in retirement. Because an HSA is one of the most tax-efficient savings options available, consider contributing the maximum and paying for current health care expenses from other sources of personal savings. Consider investing a portion of your HSA assets intended for long-term savings in an asset mix that works in conjunction with your other retirement assets.

For 2023, the self-only coverage limit will increase to $3,850, and the annual family limit will increase to $7,750. The IRS treats married couples as a single tax unit, which means you must share one family HSA contribution limit of $7,300, or $7,750 in 2023. If you and your spouse have self-only coverage, you may each contribute up to $3,650, or $3,850 in 2023, annually into your separate accounts.

Diversify Investments: The first step in coming to a compromise on your investment approach as a couple is identifying your joint investing goals. The second is to make sure those investments are diversified. Diversification is the golden rule of investment, and it becomes critical upon retirement. It simply means not putting all your eggs in one basket to ensure you have a stable retirement income. This may include investing in stocks, bonds, real estate, and alternative investments, such as precious metals or commodities.

Be Mindful of Taxes: Taxes are an important consideration for couples retiring in Colorado and Connecticut. Here are some tips for understanding and managing taxes in these states:

  1. Colorado State Income Tax: Colorado imposes a state income tax on residents, which includes retirees. Retirees who receive retirement benefits may be subject to state income tax on those benefits.
  2. Connecticut Estate Tax: Connecticut imposes an estate tax on residents who pass away with a taxable estate. This tax can impact retirees who have a significant amount of assets and want to leave them to their beneficiaries.
  3. Sales Tax: Both Colorado and Connecticut have a state sales tax, which can impact retirees who live in these states. It is important to budget for sales tax when creating a retirement plan.
  4. Property Tax: Both Colorado and Connecticut have property taxes, which can be a significant expense for retirees who own a home. It is important to factor in property tax when creating a retirement budget.

Talking of taxes, it is important to be mindful of the other tax implications of your financial decisions, particularly when it comes to withdrawing money from your retirement accounts and filing taxes jointly.

Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns. Couples who file together qualify for multiple tax credits, including the Earned Income Credit (EIC), the child and dependent care credit, the American opportunity tax credit (AOTC), the lifetime learning credit (LLC), and the saver's tax credit.

Aligning Your Financial Goals

It is essential for couples to have open and honest conversations about their financial goals and priorities for retirement. This includes discussing when each partner wants to retire, how much money they need to live on, and how they plan to allocate their resources.  It's important for couples to understand all of their sources of retirement income, including Social Security, pensions, annuities, and investment portfolios.

Another big factor to consider is agreeing on retirement age. One partner may want to retire earlier or later than the other, which can impact retirement planning and Social Security benefits. Couples should consider the impact of individual retirement ages on their joint financial plan and determine a strategy that works for both partners. 

Final Thoughts

In conclusion, wealth management and retirement planning as a couple requires open communication, collaboration, and a shared commitment to their joint financial future. By considering these key differences, couples can work together to create a comprehensive and effective retirement plan. 

Working with a Fiduciary advisor is an important aspect of retirement planning for couples. A Fiduciary advisor can help couples make informed decisions about their finances, create a comprehensive retirement plan, and invest in income-generating assets. All without emotions involved. 

At Agemy Financial Strategies, we offer personalized and expert guidance to help couples achieve their wealth management goals. This includes helping couples understand taxes, develop a budget, and invest in income-generating assets.

We ensure that all of our clients receive unbiased and objective advice from trusted professionals who are committed to acting in their best interests. If you're a retired couple in Colorado or Connecticut, contact us here today to schedule an appointment.