facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Retirement Planning Considerations for Couples With an Age Gap Thumbnail

Retirement Planning Considerations for Couples With an Age Gap

Decisions surrounding retirement are rarely simple. This further becomes the case when there is an age gap between couples, resulting in differences in retirement dates, life expectancy, health and more. How will your May-December romance handle all of the financial issues involved?

For couples of varying ages, traditional retirement advice may not be applicable. Their retirement fund will not only need to provide for one but two individuals encountering different stages in their lives and their careers. If there is an age gap between yourself and your spouse, here are a few considerations to take into account. 

Consideration #1: Your Retirement Date

One of the most critical details to consider is the start of your retirement. If one spouse continues working while the other is retired, how will the dynamic shift? Alternatively, you may choose to retire at the same time.

Staggering the start of your retirements can also be beneficial. For example, if the younger partner continues to work, they may maintain employer health coverage until both partners are eligible for Medicare. Additionally, their earnings can reduce the need to minimize the portfolio, extending the length of their savings. 

It’s possible that one spouse retires early so that the couple can stop working at the same time. Or perhaps the older spouse loves their job and has no problem working for a few more years. Ultimately, the decision comes down to you as a couple and your approach to the circumstances. Either way, it’s crucial that you consider this because the decisions you make regarding the beginning of your retirement chapter will impact how you plan financially. 

Consideration #2: Social Security

Another key detail to be considered strategically is when to begin collecting Social Security. If an age-gapped couple retires at the same time and claims Social Security, the younger spouse may receive reduced benefits. Alternatively, if the younger spouse begins collecting benefits at age 62, their lifetime benefit could be reduced exponentially. Remember that you don't need to claim Social Security right away once you retire! It usually makes more sense to begin drawing down from a portfolio rather than claiming Social Security early.

If the older spouse makes more than their partner, it will probably make more sense for them to delay taking Social Security benefits for a few years. By waiting, the older spouse’s benefit will grow eight percent each year past their Full Retirement Age (FRA) up to age 70.

Consideration #3: Your Investments

As retirement nears, investments often move from a more aggressive, growth-oriented portfolio to a conservative, wealth-preserving portfolio. If your partner is significantly younger than you, you may consider maintaining a slightly more aggressive portfolio than couples who are closer in age. This allows your retirement savings to benefit from more growth potential, ultimately benefiting your spouse later in life. Although the potential for losses during a market downturn increases, the younger spouse can help offset them with ongoing contributions from paychecks (if they are still working). 

Consideration #4: Health Costs and Life Insurance

There is a key advantage to being in a partnership with an age-gap: the younger spouse will likely be able to care for the older spouse if needed. On the other hand, the younger spouse’s long-term care needs are then put into question. 

Purchasing a long-term care policy that covers only the younger spouse may be beneficial to your relationship. Alternatively, buying a deferred income annuity or using a portion of your 401(k) as the younger partner to buy a Qualified Longevity Annuity Contract (QLAC) to cover costs is another available option. These kinds of longevity annuity are most useful for people who:

  • aren't concerned about leaving a legacy to heirs or charity
  • have enough money to fund a portion of retirement, but are worried about running out of money if they live a long time
  • expect higher than normal longevity

Get A copy of our booklet "Six Conversations every couple should have before retiring"

For couples who are already starting to think about retirement, this is a good overview of how to discuss and manage the challenges you will face when retiring. Don't go into retirement without a plan!

Questions About Planning for Retirement?

Normal resources for retirement planning may not be useful for couples who have a large age gap. You can miss out on some good tax planning opportunities with staggered retirements, and there are additional challenges to accessing portfolio assets if one partner is below 59.5 years old when you both retire. If you have any questions about how best to plan for your retirement, feel free to reach out to us! We're happy to take a look at your situation and see if we can help you plan for a seamless transition into retirement.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.