Retiring Before (or After) Your Spouse: 7 Questions to Ask
In a perfect world, you and your spouse may want to retire at the same time and savor your Golden Years, worry-free, together. Many people often envision spending their retirement this way. But in reality, there are any number of situations in which retiring at the same time might not be practical or even possible.
For example, one spouse might be ready to retire while the other would rather continue to work. Or perhaps there is a large age difference between the two, and one is of retirement age, but the other won’t qualify for retirement benefits like Medicare or Social Security for many years. Another possibility is that one spouse has a health issue that is forcing an early retirement, but the couple isn’t eligible for Medicare and needs employer-sponsored health insurance.
For a lot of couples, the truth is they simply haven’t saved enough for both to retire at the same time.
These are just a few scenarios where only one spouse might retire while the other continues to work, at least for the time being.
If you find yourselves weighing the possibility of staggering your retirements, we’ve compiled a few things to consider. If you have a concern that is not addressed below, contact us. Montgomery Taylor Wealth Management is a Santa Rosa-based firm serving the greater Sonoma County area since 2002.
Have a question about retirement? Contact Montgomery Taylor Wealth Management and get the conversation started.
Age is an important consideration, especially in situations where there is a large gap in age between two spouses. When this is the case, issues often arise because only one spouse has reached retirement age, qualifies for Medicare and Social Security, and is eligible for retirement-plan withdrawals, and it will be more than a few years until the other spouse reaches that milestone. This does not, of course, prohibit the younger spouse from retiring at the same time, but it will call for extra considerations.
If the younger spouse has an enjoyable job that offers good healthcare options, why not keep working for a few more years? If you can physically and financially afford to, it allows you more time to earn and set money aside for retirement and for your investments to grow. Working longer can also push off drawing from your retirement accounts.
What Would Your Retirement Plan Look Like If One Spouse Retired?
Studies show that Social Security will only replace about 38 percent of an average worker’s earnings when retired, so it’s important to be strategic to preserve your retirement assets. If, as a couple, you haven’t saved enough to cover your expenses in retirement, one spouse may have to continue working.
Talk to a financial advisor. Estimate your retirement income and expenses, and measure the gap. Consider longevity risk. If the numbers don’t add up to support both spouses retiring at the same time, discuss your options, and get a true understanding of what each scenario looks like.
Who Has the Better Benefits?
Healthcare is one of the leading costs in retirement. And prices continue to increase. If you retire, you’ll more than likely lose any healthcare benefits offered by your employer. And if you’re not yet 65, you’re not eligible for Medicare, even if your spouse is over 65 and eligible for Medicare.
In cases where only one spouse qualifies for Medicare, the health insurance coverage offered by an employer is likely better and less expensive than insurance you could purchase on the open healthcare market.
Talk to your financial advisor and weigh your options.
Do Either of You Have Part-Time Possibilities?
If benefits aren’t a concern but income or retirement savings are, you might think about reducing your working days or hours, getting a part-time job or finding a consulting position. If you’re lucky, you may even be able to negotiate benefits with part-time or consulting work.
If one spouse has a better possibility to work part-time, this may be a good compromise to both retiring fully at the same time.
How Does Staggering Social Security Benefits Work?
The longer you wait to begin filing to receive your Social Security benefits, the higher your monthly payments will be when you do start collecting. If one spouse retires and begins to collect Social Security, but the other continues to work beyond age 62 (currently the earliest you can receive Social Security), the working spouse’s benefits will continue to increase by about 8 percent every 12 months until he or she turns 70.
What Will Life Look Like When One is Retired and One Isn’t?
Although it may seem fickle and silly, don’t forget to consider the affect that an asynchronous retirement can have on you as individuals and as a married couple, especially if retiring at different times wasn’t the initial plan. Even the happiest of marriages can be tested by such an adjustment.
Having an open discussion about expectations, especially when it comes to household responsibilities, can go a long way. Imagine the potential for disagreements when one spouse is on the couch when the other leaves for work in the morning, and is still on the couch when he or she returns home in the evening! Talk about how roles may change and chores, like making dinner and doing laundry, may be redistributed.
Another tip: Make time for each other. Plan a quiet hour each day to have dinner or watch a TV show together. Offer support. Both the retired spouse and the one who will be continuing to work may need moral support. The newly retired spouse will suddenly have a lot of free time and might not be used to spending so much time idle or alone. The working spouse may start to feel underappreciated.
How has COVID-19 Impacted Your Retirement Plans?
The Coronavirus pandemic has changed plans for many pre-retirees. Some have chosen to retire early, perhaps to minimize the risk of getting sick or to help care for grandchildren who are schooling from home. Others have been forced to delay their retirement plans for one reason or another.
The pandemic has also imposed restrictions and limitations that may affect people’s plans in retirement, which could change the timeline for some folks. If you and your spouse planned to retire and travel the world together, for example, or spend time visiting family, COVID might have you pushing back your retirement date until things start to improve.
If you have a question directly related to the pandemic, give us a call. The financial advisors at Montgomery Taylor Wealth Management are here to help!