Equalizing retirement accounts with spouse
Hi all, I've been pondering this idea for some time and am seeking input on how best to go about it.
I'd like to figure it out so my wife and I have roughly equal retirement accounts. It's complicated because she's a teacher who participates in the state teacher pension system (roughly 10% of each of her paychecks goes into this), so she won't need as much in her Roth and rollover IRA (from a previous job) as I would in mine, if we're trying to keep things equal. Because I won't have a pension. So in theory, we should be putting more money into my retirement accounts (401k + Roth) than into her retirement accounts (Roth), because she's already got about 10% of her paycheck going into her pension.
First of all, is this a silly goal to try and achieve approximately even balances between retirement balances? Or is it a worthwhile endeavor, just to ensure that we're both on even footing, since retirement accounts are individual but otherwise our finances are totally combined?
Second, are there any calculators out there to help with this, i.e. to find out the equivalent dollar amount of a 401k/Roth IRA account when compared to a pension fund? Like if a pension fund might be paying $50k a year in perpetuity, what would that equate to in a 401k or Roth IRA balance? And how does that relate to how much we're contributing currently?
At first glance, I might have said "We want to contribute 15% of our incomes into retirement. In my case, I'm simply putting 15% of my income into 401k & Roths. She's putting 10% of her paycheck into her pension automatically, therefore if she just puts 5% more into her account, that will be equal to mine." But I'm sure it's not as simple as this. Because our "balances" at retirement will probably be way different, even if we're each contributing 15% of our similar salaries toward pension/retirement, because the pension system is way different from how a 401k/Roth might grow and be calculated.
Hope this makes sense. Would love to hear what others think. Thanks in advance!
Silver Guitar I suspect someone might chime in here, and I have thoughts, but they're pretty far outside the scope of YNAB! The answer may depend a lot on whether you live in a community property state.
- Try asking on the Bogleheads forum. We're not affiliated with them, but the forum over there is full of very smart and generous people. They can also be very blunt.
- Structuring your portfolio this way is going to be very, very complicated. Aside from the pension issues, it's going to mean either trying to recreate precisely the same asset allocation in each spouse's portfolio (which may be impossible given 401k options) or having to make frequent changes to your deferrals in order to attempt to re-equalize the portfolio balance. So be sure you have an incredibly good reason for doing it. :)
It sounds to me like your goal might be to ensure that your retirement assets are divided equitably in the event that Something Bad Happens. There are a variety of tools for achieving that goal, and I would consider all of them, even the ones that nobody wants to think about, like the one with "-nup" in the name. 😁
Cool answers from the bogleheads forum! Also confirmed what I was thinking too. It is so impractical and I am known to occasionally overcomplicate some simple stuff, but never this. I don't even get how couples can do the whole percentage of income for this and that thing. Just dump it together and make joint decisions, so much easier.
In my situation, there is NO way we could ever be equal in our retirement accounts. I've never worked, he has all the income. But I had money back in the day where I started investing earlier and intermittently started yearly rollovers into IRAs. Plus, I have an inherited IRA too. My tax-advantaged accounts are at least 4 times his. So he has income, I have assets, and that's just how it's going to work for our lifetime (barring a lottery win).