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Should You Have a Joint Retirement Account?

February 25, 2019 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Should You Have a Joint Retirement Account?

While tackling student loan debt and buying a house are top of mind for some, planning for retirement may be looming in the back of your mind. According to the Center for Retirement Research, 50% of households are at risk for not having enough to maintain their living standards in retirement.

A great way to start your retirement savings plan is to work shoulder-to-shoulder with your partner. You have probably heard of joint checking accounts, but what about joint retirement accounts?

Joint retirement accounts may not be straightforward, but there is a way to work on retirement plans as a couple. Prepare your golden years with a few tips to combine retirement forces.

What are Your Retirement Goals as a Couple?

Talking openly and honestly about your finances is one of the keys to building a healthy financial plan. First, you should have a productive conversation about your goals for retirement with your significant other. Do you plan on staying in the same home during your retirement years? Perhaps you want to travel internationally once per year or buy a camper and travel across the country.

Determine the amount of money you want in retirement, too. A great way to determine this is to multiply your current income by 10 . This is a general rule of thumb, and of course, each couple’s retirement number is dependent upon their standard of living.

Author and entrepreneur Tony Robbins suggests taking how much you spend to maintain your current lifestyle and multiplying it by 20 . You can also use SoFi’s Retirement Calculator to see if you are on track.

In either scenario, put the numbers together and figure out what you can safely withdraw from to make your retirement last as long as you do.

Determining When Both of You Will Retire

Do you know when you and your partner will retire? We all dream of retiring early, but when it comes to retirement preparedness, 60% of households have a good sense of whether they are on track for retirement. Remember, retirement plans like 401(k)s and IRAs cannot be withdrawn from until you reach age 59½ without paying a 10% early withdrawal penalty.

If you or your partner wants to retire earlier than 59½ (don’t we all), then it might make sense to put some of your retirement funds into a brokerage account that you can access at anytime.

Naming Your Spouse as a Beneficiary

While there are many approaches to retirement planning, unfortunately, there aren’t any options that operate as a joint retirement account by default. But, a work around to this is to name your spouse as a beneficiary in your retirement account or as your power of attorney. If something were to happen to either one of you, your partner will still have access to your accounts and the money in it.

Let’s go over how you can make the most of individual accounts and view them as joint retirement accounts.

401(k) plans

401(k) plans are retirement plans sponsored by your employer, so only you, the employee, get to sign up for one. If you want to include your spouse, you can designate them as a beneficiary, but they won’t be able to contribute to the plan.

Defer taxes as a couple by maxing out your 401(k) plans. Because 401(k) contributions are made before tax, you won’t be taxed on that money until you retire and start withdrawing from the account.

Roth IRAs and Traditional IRAs

There isn’t a joint account option for traditional or Roth IRAs. Remember, these are called independent because there can only be one owner. You can, however, designate your partner as a beneficiary, so in case anything were to happen to you, your partner can receive the funds.

For couples who want to maximize the use of IRAs, each one of you can open an IRA and 401(k) contribute up to $6,000 per year individually. That’s a combined $12,000 in retirement money.

Be sure to check if you qualify for a tax deduction on your IRA . If your modified adjusted gross income is $103,000 or less, you could qualify for a full deduction up to your contribution amount.

Spousal IRAs

If you have a partner who is not working or makes a low income, your spouse could qualify for a spousal independent retirement arrangement (IRA). This isn’t a special type of IRA, rather it’s a traditional or Roth IRA that allows a non-working spouse to use as a retirement vehicle.

Spousal IRAs are not a joint account, but you do need to be married and filing a joint tax return in order to apply for one. The maximum annual contribution for a spousal IRA is $5,500 per year , and you can name your spouse as a beneficiary to the account.

Brokerage Accounts

Brokerage accounts aren’t technically retirement-only vehicles, but you can certainly use one (or several) to grow retirement money jointly.

Brokerage accounts can be made up of the same funds that you would use in a 401(k) or IRA, minus the tax advantages. But you can access or withdraw the money at any time without any additional penalty. Your investment earnings are also taxed at the federal, state, and sometimes local levels, so be sure you understand how that impacts your retirement goals.

When you have a joint brokerage account, both you and your partner can be deemed equal owners of the account. That means that any money that is moved or funds that are bought or sold must also be approved by the other owner. Brokerage accounts can be used as a joint retirement account.

What Should I Avoid in a Joint Retirement Account?

Not sure which retirement plan is right for you? Avoid over-complicating your retirement plans and retirement plan types. Having several accounts that aren’t maxed out might not work in your favor.

Focus on one type of retirement account first and work on maxing it out before moving on to a different retirement vehicle. In this way, you get the maximum benefit of the account for retirement.

If you are truly working on retirement as a couple then you should treat both yours and your partner’s retirement accounts as one savings pot. Avoid comparing individual contributions with your partner.

View individual retirement accounts as a portion of your joint retirement funds. Once you hit retirement, both you and your partner will be spending the money together so view it as one entity. If you are looking for a day to day joint account, SoFi Money® makes it easy to create one single cash management account for you and your +1.

Work with SoFi Invest®

If you’re ready to tackle retirement, put SoFi to work with automated investing. With just $20 per month to start your investment account, you’ll gain access to real advisors to help you plan for the long haul.

Are you super confused about investing? We get it. That’s why SoFi uses the latest technology to actively manage passive assets for a low-cost way to get your investments rolling in the right direction. We’ve got the right people and the right tech to get you started.

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