How much retirement savings is enough? Why couples may disagree

Women have good reason to be more anxious about the size of a nest egg.

  • By Glenn Ruffenach,
  • The Wall Street Journal
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My wife and I are approaching retirement. I think our nest egg is in good shape, but my wife is worried that our expenses will be larger than we think and that, in the long run, we might run out of money. She even talks about delaying our retirement. I have assured her that the numbers work, but she’s still anxious. Any thoughts?

This question gives me the chance to highlight an issue that can get overlooked in retirement planning: the financial burdens that women, in particular, face late in life.

First, I applaud the fact that you and your wife are talking about retirement budgets. (Many couples don’t.) I’m not sure what, specifically, is prompting your wife’s concerns, but it might help her to know that she has lots of company.

Consider: A survey last year by the National Council on Aging and Ipsos, a polling and data firm, found that fully half (51%) of women age 60 and older are worried about outliving their savings. In the same survey, almost six in 10 women (59%) said they are worried about losing their independence.

Why these fears? The answers, in large part, are tied to longevity and health care.

Women, of course, typically live longer than men—about five years, on average—and are more likely to live their final years alone. In 2019, almost half (44%) of women age 75 and older in the U.S. lived alone, according to the Administration on Aging. Living longer and living alone typically mean more health problems. And more health problems mean more medical bills and, potentially, the need for long-term care.

In short, women can face expenses late in retirement that are larger and more painful than many couples might anticipate.

In a 2017 report, HealthView Services Inc., a provider of software for retirement health-care costs in Danvers, Mass., calculated that a healthy 65-year-old woman retiring in that year and living to age 89 could expect to pay $306,426 for health care, including premiums for Medicare Parts B and D, a supplemental insurance policy, and all out-of-pocket costs, as well as dental and vision care. A man at the same starting age and living to 87 could expect to pay $260,422. (And those projections don’t include the potential cost of long-term care.)

The good news: There are strategies and tools that can help couples prepare for these outcomes, such as long-term-care insurance, life insurance, deferred annuities and reverse mortgages.

Several calculators can provide ballpark figures about medical expenses in retirement, including those from Fidelity Investments, Optum Bank and ICMA-RC, a Washington-based nonprofit that provides retirement plans and services. In addition, MoneyHabitudes.com has activities designed to get people comfortable talking about their finances.

Of course, a good financial adviser also can make a difference. But the most important step is to talk before retirement about how your finances might play out when you get there—which, thankfully, you and your wife appear to be doing.

I am going to be 70 in mid-December. What is the latest date I can take a required withdrawal from my 401(k), and what is the date of the subsequent second withdrawal? I believe the age was changed to 72, which would be 2022 for me. I think the withdrawal deadlines are confusing, particularly when a person wants to avoid having to take two withdrawals in the same calendar year.

First, you are correct: The Secure Act, which became law in December 2019, changed the beginning dates and ages for required minimum distributions. Second, you are also correct: This can get confusing.

The new rules state that if your 70th birthday is July 1, 2019, or later (obviously, this includes you), you don’t have to take withdrawals until you reach age 72. The rules also state that you have until April 1 of the year following the year in which you turn 72 to take your first RMD.

So if you reach age 72 in mid-December 2022, you must take your first RMD by April 1, 2023. If you wait until April 1, you will be required to take two distributions in 2023: The first RMD (which you must take by April 1, 2023) will apply to 2022, the year in which you turned 72. The second RMD, which you must take by Dec. 31, 2023, will apply to 2023.

Of course, there is a way to avoid taking two RMDs in a single year. If you turn 72 in mid-December 2022, you can take your first RMD by Dec. 31, 2022. Then, you can take your RMD for 2023 at any point during 2023.

The Internal Revenue Service does a good job of explaining all this.

My question relates to Social Security and the best scenario for my wife and myself. I was told that to maximize our benefits I can elect to begin benefits at age 68 but postpone until 70, and my wife can receive 50% of my benefit and then claim her benefit at 70. Is this correct?

I’m afraid this strategy is no longer available.

To be specific, this was known as “file and suspend.” And it used to be quite popular. A husband (and it was usually a husband) who reached his full retirement age could file for Social Security—and then turn around and suspend his payouts. At that point, his wife (assuming she was 62 or older) could begin collecting Social Security benefits. In the meantime, the husband’s suspended benefit would continue to grow, thanks to delayed retirement credits.

In short, it was a sweet deal. But Congress eliminated this particular practice in late 2015. The last point in time when couples were able to take advantage of this strategy was April 2016.

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