Retirement is undoubtedly among life’s most significant transitions. However, it’s not uncommon for a couple to overlook the best retirement strategy because there is so much to consider.
For at least two decades, most U.S. households have been dual-income households. More specifically, 49.7% of married-couple families had both spouses working in 2023, up from 48.9% in 2022. Therefore, when planning for retirement, most people should consider this.
Why? Timing can be particularly nuanced for couples. Unlike single retirees, couples need to consider the advantages and disadvantages of retiring together, retiring at different times, or staggered retirement to maximize financial and lifestyle opportunities.
In this article, we will examine how couples can transition financially, emotionally, and practically into retirement.
Deciding Whether to Retire Together or Stagger Retirement
Most couples dream about retiring together, enjoying newfound freedom, traveling, or simply spending leisurely days together. However, despite how idyllic the idea may sound, retiring together is not always the best option for every couple. The situation gets much more complicated when personal, financial, and health goals differ — or life throws you a curve ball in one of these areas.
In general, couples should consider three timing strategies;
- Retiring together. The couple retires simultaneously, creating a seamless transition into their new lifestyle. According to a survey by Ameriprise, only 11% of American couples retire together.
- Staggered retirement. When one partner retires before the other. Usually, it’s the older partner who has had a more demanding job.
- Phased retirement. By reducing their hours gradually, one or both partners ease into retirement through part-time work or side hustles.
Each strategy has pros and cons, depending on the couple. Below are the features of each option.
Benefits and Challenges of Retiring Together
Retirement at the same time just seems to make sense. Many couples would agree that this is the case. After all, couples can enjoy their newfound leisure time more fully if they retire together. Traveling, sharing hobbies, and enjoying a slower-paced life together are all possibilities.
Moreover, couples can experience the transition to retirement together, creating a strong sense of unity and understanding. A joint retirement simplifies financial planning by consolidating expenses and aligning a budget with your new lifestyle. In most cases, this is accomplished through downsizing and decluttering.
Both spouses must, however, be genuinely agreeable. For example, if your spouse still enjoys working and only retires to spend time with you, you may feel regretful.
There’s also the possibility of financial strain. Both partners will stop earning income simultaneously, so retirement funds must be managed carefully to ensure they last. To avoid potential financial pitfalls, couples should evaluate their financial readiness, considering pension plans, Social Security benefits, and healthcare costs.
Additionally, transitioning to a more “together time” setup can be challenging for many couples. This can be particularly true if both partners have independent routines.
Ultimately, couples wishing to retire together should assess their retirement portfolios to ensure they live comfortably without unnecessary financial stress.
Staggered Retirement: Advantages and Potential Drawbacks
Retiring at different times can depend on one’s personal circumstances, such as age or the ability to continue working. Sometimes, however, financial considerations are the primary factor.
By keeping one spouse working, both can maintain their health benefits and continue to contribute to retirement funds. Furthermore, retirement savings are reduced by the income from one spouse’s job, allowing the retired spouse some flexibility.
However, it is essential to note that staggered retirement can maximize Social Security benefits. By delaying claiming Social Security, a higher-earning spouse can earn delayed retirement credits, increasing their monthly benefits and those of their surviving spouse.
At the same time, there are potential drawbacks to staggered retirement.
When one partner is employed while the other is retired, couples may experience lifestyle imbalances. Despite wanting to retire, the retired partner may feel lonely or unfulfilled, and the working partner may feel pressured to stay at work despite wanting to retire.
Further, if you want your staggered retirement to work, you must communicate honestly about expectations, household responsibilities, and financial planning to avoid resentment or imbalance.
Staggered retirement is generally a good idea for couples with age gaps or those who wish to maximize Social Security and pension benefits.
Phased Retirement: Easing into Retirement Gradually
In phased retirement, one or both partners gradually reduce their work hours. A phased retirement offers several options to ease your transition to retirement, including;
- Part-time work. Your work hours should be reduced gradually while still balancing leisure time.
- Seasonal work. You can take on temporary roles that match your interests and availability.
- Freelancing. Work on projects that suit your skills and schedule independently.
- Consulting. You can help organizations that need your guidance by sharing your expertise.
- Entrepreneurship. Become your own boss and follow your passion.
As well as providing flexibility, reduced stress, and continued engagement in your profession, these options can;
- Maintain an income. Working part-time can reduce retirement savings pressure while allowing couples to live more leisurely.
- Adapting psychologically. By gradually easing into retirement, couples can develop interests outside of work while still remaining socially active.
- Providing extended health coverage. If your company provides health insurance, phased retirement prior to Medicare eligibility can help keep coverage costs low.
However, there are also challenges to be aware of;
- Employer limitations. For some employers, reducing hours may not be feasible or may adversely affect pension benefits if they offer phased retirement options.
- Balancing schedules. Lifestyle discrepancies may still exist if only one partner opts for phased retirement. Therefore, it is essential to communicate clearly and compromise.
Couples seeking to ease into retirement with flexibility can benefit from phased retirement. This is especially true when one or both partners are ready to scale back but are not yet ready to retire fully.
Timing and Social Security Benefits
In retirement, Social Security benefits provide a significant income source for many couples. So, timing is critical when claiming benefits. Here are a few strategies to consider;
- Claiming Early vs. Delaying. Sometimes, couples might stagger their Social Security claims, with one spouse claiming benefits early and the other delaying. During this time, the higher earner gets a larger benefit, maximizing their lifetime benefits.
- Survivor Benefits. If one partner delays claiming benefits, the benefit amount increases. As a result, the plan offers not only more retirement benefits but also a substantial survivor benefit.
- “File and Suspend” Strategy. Even though some Social Security claim strategies have changed, couples can still benefit from combining early and delayed claims. It depends on their individual income needs and life expectancy.
In order to determine the best timing for Social Security benefits, couples should work with a financial advisor.
Managing Health Insurance Considerations
Another important consideration for couples who retire before 65 is health insurance. Before Medicare eligibility, there are several options for health insurance;
- COBRA. Although costly, COBRA coverage can temporarily extend an employer’s health plan.
- Spousal Coverage. If one partner works, it may be more affordable to cover the retired partner under their health plan.
- Private Health Insurance. Until couples qualify for Medicare, private insurance may be their only option, so including these costs in retirement plans is essential.
For coverage gaps to be bridged, careful planning is required.
How to Build a Joint Retirement Vision
Regarding retirement timing, there are many factors to consider, including lifestyle, personal goals, and family dynamics. But you can create a joint retirement vision by following these steps:
- Establish your goals. As a couple, you should define your retirement vision. This includes where you want to live, what activities you want to pursue, and how much time you expect to spend together versus separately in retirement.
- Discuss finances openly. Financial transparency is essential to navigating retirement timing. Couples should discuss financial goals, retirement budgets, and any potential concerns openly.
- Adapt as needed. Circumstances, health, and personal goals can change over time. Keep your financial plans on track with regular check-ins with a financial planner and open communication as a couple.
Conclusion: Finding Your Perfect Timing
Couples should choose retirement timing strategies that align with their financial and personal goals. To ensure a successful retirement, you must communicate openly, create a shared vision, and make adjustments throughout your lives.
Couples can enjoy a well-coordinated retirement plan that meets their financial goals and lifestyle desires.
FAQs
Should we retire at the same time?
Not necessarily. Retiring together may be appealing, but it doesn’t always make financial sense. Instead, it may be beneficial to retire in stages;
- Increased Social Security benefits. If you delay claiming Social Security, your monthly payments may increase.
- Continued income. Having one spouse work can provide additional income and reduce the need to rely on retirement savings.
- Tax advantages. It is possible to manage tax implications by timing your actions strategically.
How can we determine the optimal retirement age for each of us?
Here are some factors to consider;
- Financial health. Consider your savings and investments, as well as the expenses you anticipate.
- Health insurance. Make sure you have coverage before you become eligible for Medicare.
- Social Security benefits. Know how claiming at different ages impacts your benefits.
- Personal goals. Take into account your desired lifestyle, travel plans, and hobbies.
What are the potential challenges of staggered retirement?
Potential obstacles include;
- Increased stress. It is possible for one spouse to feel burdened by financial responsibilities.
- Relationship strain. There can be tension between people with different lifestyles and free time.
- Health concerns. One spouse’s health can affect the retirement plans of the other spouse.
How can we effectively communicate about retirement plans?
Communication must be open and honest;
- Schedule regular discussions. Set up a time to discuss your financial concerns, goals, and dreams.
- Listen actively. Don’t forget to validate your partner’s feelings and pay attention to their perspective.
- Seek professional advice. To gain expert insight, consult with a financial advisor.
- Be flexible. Over time, plans may change, so be flexible.
What are some strategies for a smooth transition to retirement?
Here are some tips to consider;
- Start planning early. Discuss your retirement goals as early as possible.
- Create a detailed budget. To maintain financial stability, outline your expenses.
- Explore part-time work options. Ensure a smooth transition from full-time work to retirement.
- Develop new hobbies and interests. To keep yourself engaged, find activities you enjoy.
- Stay connected with friends and family. Keep in touch with friends and family.
Image Credit: Terrillo Walls; Pexels
