A lot of things go unsaid among couples, but here’s one thing that shouldn’t: retirement age.
Couples often assume they will retire together. Yet the majority of couples don’t, according to a recent paper co-written by RAND’s Katherine Carman.
Moreover, the couples more likely to retire together were those with a large age gap, a situation that can complicate retirement planning. Take a woman who is a decade younger than a spouse who wants to retire at 65. If she retires with her partner—at 55—she needs retirement income for 40-plus years, potentially putting stress on a portfolio that didn’t take that into account, says Natalie Colley, a certified financial planner at Francis Financial.
Here are five things financial advisers suggest couples consider:
The typical advice is to delay Social Security until the age of 70 to get an extra 8% in benefits for each year you waited past full retirement age. The strategy is even more important for couples—especially if the higher-earning spouse is older. If that partner dies, the surviving spouse can get a larger widow’s benefit if claiming had been delayed. That larger benefit can ease the strain on a budget that had been accustomed to two Social Security checks, Colley says.
To work, or not to work
Partial retirements are becoming more common as people choose to ease into retirement with a part-time job, whether it is for enjoyment, to shore up retirement savings or supplement income to delay Social Security.
In a situation where someone is thinking about retiring alongside their older partner, financial advisers recommend women in particular think about the calculation for Social Security benefits, which is based on the average monthly earnings during the worker’s highest-earning 35 years. For women, the later years of their career can be crucial to that calculation since some women are just beginning to soar in their careers as their older spouses hit retirement age, says Manisha Thakor, vice president of financial education at wealth manager Brighton Jones.
For those who have not yet hit a 35-year work history, Thakor recommends continuing to work, even part-time. For those who’ve worked less than 35 years, any years in which you haven’t worked will be recorded as a zero, which will dramatically reduce your average lifetime earnings. (A person needs to work at least 10 years and earn a minimum of 40 work credits to be able to claim Social Security.)
The other consideration is health care. Though one spouse may qualify for Medicare, the other—if they are under 65—is still on the hook for their own health insurance. Often clients may decrease their hours to the point they can still get employer-based health care—for themselves and sometimes also for their retired spouse, says Suzanne Wheeler, a certified financial planner at Mariner Wealth Advisors in Amarillo, Texas.
For women who decide to retire alongside an older spouse, financial advisers recommend that they at least wait to draw on Social Security, even if that means taking money out of their portfolios to supplement their income in the meantime.
The typical advice for retirees is to take a more conservative approach to their portfolio. That advice is increasingly up for debate, with some making the case for more stocks than the adage of matching your stock allocation to your age subtracted from 100. But for couples with an age gap, a more aggressive asset allocation—or a higher helping of stocks—may be needed to sustain the portfolio for a longer period, Wheeler says.
The Internal Revenue Service offers at least one benefit to couples with a sizable age gap. When the older spouse hits 70.5 and needs to take required minimum withdrawals from tax-deferred assets, the amount required is less for couples where one spouse is younger, because the calculation is based on life expectancies and accounts for the age of the spouse (as long as the spouse is the sole beneficiary).
Long-term care is another consideration. For those who are averse to the idea of buying long-term care insurance because of the cost, Colley recommends that the couple buy coverage for at least the younger spouse—often a woman, and women tend to live longer—even if it is a cheaper policy that just covers home health care aides to assist with caregiving.