Deciding Which Retirement Option is Best for You
When you think of retirement, do you imagine riding off into the sunset with your significant other? Or do you imagine staggering your retirements to occur at different times? There are certainly pros and cons to both options, but only about half of spouses tend to retire around the same time (or at least within two years of each other) for personal, financial, or logistical reasons.
The fact of the matter is that married couples don’t always have the same age or date in mind when it comes to their retirement vision. In fact, according to a recent study by Fidelity, 43% of couples disagree about what age they plan on retiring. For other folks, circumstances like an unexpected job loss or health issue push spouses onto separate retirement schedules.
Of course, there is no “right way” to do it. A lot of it depends on being ready, your communication as a couple, and what your relationship dynamic has looked like for the duration of time you’ve been together. As is to be expected, what works for one couple may not work for another. Your ages, health, and retirement benefits will likely also play a role in deciding which option works best for you.
What’s important is that you both understand the effect each choice will have on your personal well-being, finances, schedules, and long-term goals. In order to get this conversation started, let’s consider the following three topics couples discuss about syncing two retirements for a shared Life-Centered Financial Plan.
1. Discuss Your Retirement Visions
Each person likely has their own retirement vision, which leaves the door wide open for expectations or desires to be out of sync. Sometimes what works for one spouse is the opposite of what works for another. For example, one spouse may feel as if their work is no longer giving them meaning and purpose while the other is still fulfilled and invested in the work they are doing. Other couples may be indifferent and choose to retire together in order to travel right away, spend more time with family, or simply just go through the transition together.
Of course, many couples make their decisions to retire based solely on finances, but this isn’t always the case. There are plenty of couples for whom the opportunity to retire far outweighs any of the financial benefits they could receive from continuing to work, and that’s ok if the financial retirement needs can be met with ease.
2. Discuss Schedules and Responsibilities
For years, I worked with a couple who insisted retiring together was not ever going to happen. The younger spouse was a business owner and entrepreneur who simply couldn’t see herself ever not working, at least until she started experiencing cognitive decline. But, since the retirement of her husband, she has changed her mind and started to transition out of the business so that she can enjoy the retired life with her husband. Come to find out, she was ready to travel more with her spouse and felt her commitments to work were holding them both back.
For some couples, seeing their retired spouse lounging around and playing an extra round of golf could breed resentment. Luckily, this wasn’t the case here because their roles and responsibilities around the house had largely remained unchanged. But, for other couples, it is necessary to have a conversation about who will handle what at home and how a model week might look both with one working and one retired spouse as well as if both of you retire at the same time. “Test driving” your retirement in this way can help you gain clarity on whether you’d like to retire together or not and set a clear expectation for who will handle what to avoid unnecessary conflict. If you think you’ll be green with envy having to clock in every day while your spouse meets up with friends, this is something you’ll want to figure out before you’re “sentenced” to another decade of work while your spouse is not.
3. Review Your Financial Plan
Remember, your financial plan should enable you to live the life you want on your own terms. But, at the end of the day, you can only work with the resources you have on hand, so you’ll need to review your financial plan before you take the long-awaited plunge into the retirement pool. How you and your spouse time your retirements can have a huge impact on your retirement needs.
Retiring separately can create some complications when it comes to health care. If the retiring spouse is leaving their employer-subsidized plan before age 65, he or she won’t be eligible for Medicare. That means the retiree will have to jump on a plan offered by their spouse’s employer or purchase health care on their state’s marketplace.
Health care is just one line item on your household budget that might go up as your monthly income goes down. Are you and your spouse prepared to tighten the family belt? Or are you going to spend more on recreational activities now that one of you isn’t working? Are you considering other sources of income, such as taking Social Security before full retirement age, making early withdrawals from your retirement accounts, or working part-time?
How you time your retirements could be influenced by Social Security benefits because waiting to claim benefits until after full retirement age (66 to 67, depending on when you were born) will increase monthly payments by about 8% per year, up to age 70. (You’re eligible to file for Social Security as early as age 62, but benefits will be permanently reduced.) To maximize benefits, many married couples claim benefits for one spouse at full retirement age but delay the other spouse’s claim, which allows that second benefit to grow.
Your Retirement Portfolio
This is a pivotal question that all pre-retirees should answer before considering retirement of either spouse: Do we have enough saved to last and provide the retirement lifestyle we want?
You see, the way your financial advisor positions your portfolio should be set up to either accommodate a joint exit from the workforce or a staggered one. Every couple’s need will differ, of course, but once all the variables are examined, you, your spouse, and your advisor can decide if your portfolio can support your ideal scenario. The earlier you and your spouse begin analyzing potential income and expenses, the more time you have to address any gaps in your financial plan.
Planning for the Life Transition to Retirement
Opening the lines of communication early, then revisiting the conversations as feelings, life goals, or financial realities change is the best course of action. You’ll want to get on the same page about your retirement visions and progress toward your financial goals before making any major decisions.
Much like deciding when to retire, there are no right or wrong reaction to the considerations above. What’s most important is coordinating every part of your Life-Centered Financial Plan so that both you and your spouse get the best life possible from your money in retirement.
If this topic is a current concern for you, this might be a good time to download and fill out our retirement coaching tool, Three Questions Everyone Should Answer Before Retiring. If you and your spouse need help, I invite you to set up an appointment here. Then, we can work through these tools and find a plan that will get you both excited about a fulfilling and successful retirement.