Dear MarketWatch,
I am almost 60 and my wife is in her mid-50’s. Our twins are almost 10. Because we had children late in life, my wife hasn’t worked in a decade. Our house is almost paid off — it’s worth around $400,000 — and I have $500,000 in my 401(k), and another $250,000 in various stocks and mutual funds. My wife does not have any retirement accounts.
I plan to retire at 67. My concern is not only having to support my wife when I retire, but also our children who will be entering their junior year of high school. We do not have a 529 plan for the twins. I have not seen any articles or advice columns for older parents like ourselves and what to do when you’re at retirement age, yet still have children at home.
Dear Reader,
Two things come to mind. First, you can borrow for education, but not for retirement. Second, your wife needs a retirement plan of her own.
Your wife needs her own retirement plan — you both do — not in case you don’t stay together, but to be protected when one day you’re by yourselves. You could both live to 95, or maybe even later, and be married all of that time, but if you don’t both have plans or assets in place for yourselves, you could be at a loss of income when one spouse dies.
IRAs are funded with earned money, but spouses who do not work can have what’s called a spousal IRA. With this type of account, assuming the couple is filing jointly, each spouse can contribute the maximum limit (for individuals age 50 and older, that’s $8,000 in 2024), the Internal Revenue Service said. Here’s more on IRA contributions from the IRS.
Even if you intend to leave all of your money to your wife, she will benefit from having an account in her own name. As a couple, you also benefit, given that you can double how much you contribute into an IRA for your future retirements. You could also potentially make a big tax deduction if you fund traditional IRAs and depending on how much income you bring in since you participate in a workplace plan. (The IRS caps deductibility when individuals or their spouses participate in an employer-sponsored retirement program.)
You can’t borrow for retirement
As I said, you can save for retirement and education, but you can’t borrow for the former. Of course, you want to do whatever you can to help your kids pay off their education expenses. Americans collectively carry $1.6 trillion in student debt, and people can carry their loans anywhere from five to 20 years. Still, you may do more of a disservice for your children if you run out of money in retirement.
Only you and your wife really understand your annual and monthly budgets. Review your cash inflows and outflows, and confirm that you’re spending the way you want to be spending. If you can adjust that spending, do so. Assess how well you’re saving, and how much you can ramp up your savings between now and when your children start college, and between now and when you expect to retire.
Focusing on your own retirement is important, especially if you’re both relying on just your income to save. Because you are closer to retirement than the “typical” parents of young kids, you may have a better idea of what you see for your retirement. Run a few numbers to see how much you’ll need in retirement, and how that translates to how much you’ll need to save every month.
You can try the exercise I shared with a reader here or look into a simple retirement calculator to help run some basic figures. MarketWatch has one such tool. If you have more money to spare than you need to save for retirement every month, put that toward your kids’ education. Those 529 plans are great options, but not the only option.
You’re not alone
You’re also not that far behind other families. More than four in 10 families started saving for college when their kids were 6 or younger, but about a third began when their kids were between 7 and 12 years old, according to a 2020 Sallie Mae and Ipsos report. Another 16% started when their kids were in high school.
There are additional ways to help your kids, including talking to them honestly and realistically about college choices and loan options. If they start to show a genuine interest in a particular subject or sport, you could also look into scholarships that could help.
There is plenty more you can do. After you’ve done the math on your savings, think of how you’re going to draw down your assets, and if you’ll need additional sources of income. You and your wife can consider taking on part-time work in retirement to help pay the bills, and delay claiming Social Security or drawing down too much from your investment accounts.
You could also look into long-term care plans. Think carefully about where you’ll live and what your spending will look like in retirement. Periodically — once a quarter or every six months — check your investments to make sure they’re on track with your preferred asset allocation. If you’re not sure what that should be, consult a qualified and trustworthy financial planner who is also a fiduciary.
Finally, keep communicating with your family. Your financial needs will evolve through the years until retirement and thereafter, so having regular conversations about these issues will be invaluable. Your kids may be too young for those conversations now, but I assure you, being open about money — how to save, spend and invest — will be an education in and of itself for your children.
Readers: Do you have suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
