Retirement planning as a couple often starts with the assumption that you'll end your careers at the same time. After all, retiring together means you're both in the position to start enjoying all the activities you've been dreaming of for years — from traveling to spending more time on hobbies to just taking more walks with each other.
But retirement as a couple is not necessarily the best plan for every married couple. Here are the retirement planning considerations couples may want to think about when deciding whether or not they should retire at the same time.
Why Retire at Different Times?
Staggered retirement may work better for retiring couples due to a number of factors, many of which are outside the couple's control.
The number one reason spouses may choose to stagger their retirement dates is because of an age difference. An older spouse may not only prefer to end a career after decades of hard work, but they're also likely to be eligible for Social Security, Medicare, pensions and 401(k) or IRA distributions before the younger spouse. If the younger spouse is not eligible for these at the time of retirement, it can put a major financial strain on the retirement couple.
Since one spouse will often take time off from their career in order to care for children or other family members, even a fairly typical age gap of just a few years between spouses can cause a larger gap in retirement target dates. The stay-at-home spouse will often continue working past their partner's retirement to make up for both the age gap and any past career (and income) gaps.
Spouses may also differ on what they consider to be sufficient savings for their retirement plans. It would be challenging to retire together if one spouse was comfortable living lean and wanted to end their career sooner, while the other wanted to have a heftier retirement portfolio before committing. In such cases, spouses need to listen to each other's needs to make sure their retirement planning eases both of their concerns. It may make sense for the more restless spouse to retire while the spouse with money concerns continues to work.
A spouse who must continue to work before becoming fully vested in their workplace's pension plan (or other retirement benefits) may have less flexibility to choose their retirement date. While it's possible they could decide to retire early in order to retire in sync with their spouse, the financial hit of losing retirement income often makes this option a nonstarter.
Financial Planning & Staggered Retirement
Intentionally deciding to retire at different times can make the financial aspect of retirement planning a little easier. For starters, couples can plan on using the working spouse's income for living expenses, which can help the couple put off dipping into their retirement accounts or applying for Social Security until both spouses are retired.
The timing for Social Security benefits can be a very important part of retirement planning as a couple. While you can apply for benefits at age 62, doing so will permanently reduce those benefits, as well as any future auxiliary benefits (such as spousal benefits). If a couple is staggering their retirement dates, Social Security benefits timing should be an important part of their financial plans.
If the retired spouse is eligible for a pension, income from that pension could also offset some of the living expenses that would otherwise be absorbed by the working spouse's income. The working spouse could then set aside more money for their eventual retirement and even potentially take advantage of the catch-up provisions for 401(k) and IRA contributions, which allow savers over the age of 50 to set aside up to $24,500 and $6,500 per year, respectively. This plan could help both spouses feel more financially comfortable once they're both retired.
A staggered retirement doesn't have to leave you feeling disconnected from your spouse. You can do what's best for both the working spouse and the retired spouse by talking through the financial implications of your out-of-sync retirement, and how you'll face those issues together.