After spending decades working hard and earning paychecks, it seems like a given that a married couple would want to sail off into the sunset to enjoy their new enriching life together. However, it may be wise for some couples to think things through a bit. There are many issues spouses should consider before deciding whether to retire together, especially when one spouse is significantly older than the other.
There are many financial and non-financial considerations that spouses should consider before deciding whether to retire together. Consider these reasons for at least one spouse to continue to work.
When one or both spouses reach the retirement threshold with sufficient funds to retire comfortably, retiring together might make sense. But if there is a question of retirement income sufficiency, couples should consider the impact of retiring separately on their retirement savings, social security, and pension benefits.
Retirement Savings: If a younger spouse retires alongside an older spouse, it has the potential to shorten the lifespan of their savings. Even if the younger spouse worked just a couple more years, it would significantly increase their retirement savings to ensure lifetime income sufficiency.
Retirement Income: Generally, the income generated by your retirement accounts and Social Security is likely to be less than the level of income you earned while working. If one spouse retires before their full retirement age (FRA), it’s likely to produce an income gap between your living expenses in retirement and how much income your retirement savings produce. Income from even a part-time job can allow you to delay taking retirement benefits, including Social Security, giving your savings more time to grow.
Social Security: If a younger spouse claims their Social Security benefits early, before age 66, they receive a reduced benefit—for life. Delaying benefits to age 70 can increase your lifetime payments by as much as 30%! i,ii
Medicare: When you leave your job, you leave your company’s health benefits behind. If a spouse retires before age 65, they are not eligible for Medicare. That means they will need to obtain private health insurance, which can be very expensive. That extra cost alone may be incentive enough to keep working to maintain employer coverage until you’re eligible for Medicare. iii
Financial considerations are easy to identify and quantify. Less obvious but equally important are non-financial considerations that could impact both spouses’ quality of life in retirement.
Health and well-being: Spouses should consider the potential benefits of spending more time together in retirement. Also, if one partner has health issues or requires caregiving, that may influence the decision.
Shared interests and activities: If both partners share common interests and hobbies, retiring together can provide more time to enjoy these activities together. On the other hand, if the spouses share significantly different interests or plans, retiring separately might allow each person to pursue their passions.
Social connections: Spouses should also consider the social aspects of retirement. Retiring together provides a better opportunity for a shared social network and more time for joint activities, while retiring separately may allow each spouse to maintain their individual social connections and friendships.
Whether couples should retire together or separately depends on various factors, and there is no one-size-fits-all answer. Different couples have different dynamics, preferences, and financial situations.
It’s essential for couples to communicate openly, discuss their individual preferences, and find a solution that works for both. Some couples may find that retiring at the same time enhances their quality of life, while others may opt for a phased approach that aligns with their unique circumstances and goals. Professional financial advice can also be beneficial in making informed decisions about retirement.
Navigating the landscape of retirement decisions can be intricate. At Uncommon Cents Investing, we prioritize understanding your unique circumstances and goals to craft a retirement strategy that aligns seamlessly with your vision. Reach out to us for personalized guidance, ensuring your retirement plan reflects your journey.