Retirement for Couples: Should You and Your Spouse Retire Together?
Retirement planning is a significant milestone for couples, and deciding whether to retire together or separately is crucial. As partners approach this new chapter, they face the critical decision of synchronizing their retirement or adopting a staggered approach. This choice impacts their financial stability, lifestyle, and overall satisfaction during their golden years.
The decision to retire together or at different times involves weighing various factors, including financial readiness, health considerations, and personal goals. Couples must evaluate each option’s benefits and challenges to determine the best path forward.
This article explores the advantages of retiring together, the potential hurdles of synchronous retirement, and the merits of a staggered approach. It also provides vital factors to consider when making this important decision, helping couples navigate this significant life transition.
The Benefits of Retiring Together
Retiring together offers couples a unique opportunity to strengthen their bond and enjoy their golden years. This synchronized approach to retirement has several advantages that can enhance financial stability and emotional well-being. Shared experiences, financial synergy, and emotional support are just a few benefits that retiring together can bring.
This is why comprehensive financial planning is crucial. It helps couples align their financial goals and create a strategy supporting retirement plans.
Research indicates that workers with the best financial well-being and mental health scores have gone through the financial planning process to develop a realistic plan and know how much retirement savings they need to maintain their desired standard of living. This is accomplished by running what’s called a Monte Carlo Simulation, producing a “probability of financial success” calculation, enabling the client to ensure realistic retirement expectations and the opportunity to make adjustments before it’s too late.
Challenges of Synchronous Retirement
While retiring together has benefits, couples often face significant challenges when synchronizing their retirement. These hurdles can impact their financial stability and satisfaction during their golden years. Age differences, career timing, and financial readiness are essential factors. This is why it is so important for comprehensive financial planning to be preemptive and where we help couples anticipate and address potential challenges, ensuring that their retirement plans are well-prepared for any obstacles.
Age Differences
Age gaps between spouses can complicate joint retirement plans. Couples with significant age differences may find it challenging to retire simultaneously, as the older spouse might need to stay in the workforce longer, or the younger one might feel pressured to retire early. This disparity can lead to financial strain, especially if the younger spouse retires before fully eligible for retirement benefits.
Financial Readiness
However appealing retiring together may be, financial preparedness is crucial in determining retirement timing. Couples may find that retiring together is not always the best financial move. Staggering retirement can help boost total retirement assets and decrease the number of years drawing on retirement benefits. Additionally, unexpected health issues or family caregiving responsibilities can trigger earlier-than-planned retirement, potentially disrupting financial plans. Couples must carefully consider their financial readiness and potential for high unexpected health and long-term care costs, including no longer receiving an Employer subsidy and if one is retiring before being eligible for Medicare at age 65.
Lifestyle Preferences
Retirement lifestyle shapes overall well-being, happiness, and a sense of fulfillment. Couples must discuss their vision for retirement, including the related costs of activities, hobbies (i.e. golf, which can be expensive), and vacation/travel plans.
Contemplate whether you will downsize to a smaller house move, the cost of living, and the tax differences of a new state. Explore what day-to-day activities you would want to do together and do some volunteering or part-time work. Coordinating this vision with your spouse is essential, as assumptions about shared plans can lead to misalignment. Consider how retirement will impact your sense of purpose, family relationships, and opportunities for personal growth.
Advantages of Staggered Retirement
Extended Income Stream
When one spouse continues to work while the other retires, powerful financial advantages are set in motion. The working spouse can continue to save and invest aggressively for retirement, contributing up to $26,000 annually to a 401(k) and $7,000 to an IRA if they’re 50 or older, plus any matching employer contribution. This extended income stream allows the couple to delay tapping into their retirement assets, potentially increasing their long-term financial security.
Phased Transition
Phased retirement offers a gradual shift from full-time work to retirement. This approach allows employees to slowly step back from their positions, providing a trial run at a different lifestyle. Many workers prefer this option, with 52% of current American employees expressing a desire to decrease hours gradually when retiring. This transition can be psychologically easier to manage compared to abruptly quitting work.
Social Security Optimization
Staggered retirement can significantly impact Social Security benefits. By delaying claiming, couples can increase their monthly payments. Each additional month of delay until age 70 results in an incremental benefit increase.
A common strategy is for the lower earner to collect first while the higher earner delays. For example, if one spouse claims at 67 and receives $975 per month, while the other waits until 70 to claim $2,715 per month, the couple maximizes their benefits. This approach boosts lifetime guaranteed income and increases potential spousal and survivor benefits. Conversely, starting retirement benefits before the full retirement age (FRA) will reduce benefits and compounded cash flow over time.
Choosing the best option is a multi-faceted process requiring a comprehensive understanding of each person’s situation.
Conclusion
Ultimately, the decision to retire together or separately depends on various factors. Couples must have open discussions about their retirement expectations, financial situation, and health considerations to make an informed decision that aligns with their shared short and long-term goals and individual needs.
Every couple’s situation is unique, and there’s no one-size-fits-all approach to retirement timing. Whether opting for a synchronized retirement or a staggered approach, the key is to make an informed decision based on careful planning and honest communication. Ultimately, the goal is to create a fulfilling retirement that allows both partners to thrive and enjoy their golden years.
As a Certified Financial Planner® at Financial Life Planning, we understand the complexities of retirement planning and the importance of comprehensive financial guidance and a proper investment management strategy. We provide expert assistance in aligning your retirement goals with a tailored strategy that suits your personalized needs, empowering couples to make informed decisions that lead to a smooth and secure transition into this new phase of life.
Reach out to us today to explore your retirement goals and discover how we can help you navigate this significant life transition confidently and clearly.
