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Many working couples dream of retiring together, but sometimes retiring at the exact same time may not be the best financial move. In some cases, it can be in your best financial interest as a couple for one spouse or partner to work longer than the other one.
Planning your retirement target dates well in advance together can help you maximize your financial benefit. Let’s look in more detail at what to consider.
Key Takeaways
- Staggering your retirement with a partner can help couples boost their total retirement assets.
- When one spouse or partner continues working, a couple can potentially decrease the number of years they draw on their retirement benefits.
- Consider health insurance options if one person retires before one or both of you are eligible for Medicare.
- Retiring at different times may also be beneficial for couples’ emotional and relationship health.
Benefits of Staggering Retirements
While it may be more convenient for a couple to retire together, staggering retirements can sometimes bring financial advantages. By retiring at different times, spouses and partners can maximize their Social Security benefits, increase retirement savings, and delay taking benefits.
“Unless couples are the same age, and in the same health, it usually makes more sense for one person to retire earlier,” Morris Armstrong, registered investment advisor with Armstrong Financial Strategies, said. “There can be both financial and relationship benefits.”
Social Security Income
You can start accepting Social Security benefits at age 62. If you claim your retirement before your “full retirement age,” which is 66 or 67 depending on the year you were born, you will receive reduced benefits. When you delay taking Social Security after your full retirement age, you will get an additional benefit, up to age 70.
Important
Essentially, the longer you delay taking benefits, the greater your payments will be, up until age 70.
So, for couples planning to retire before they are 70, it may make more sense if one continues working so that both one or both spouses may delay taking Social Security to maximize the benefit.
Income for Savings
In addition, the continued income from the working spouse can give the couple a few more years to save for retirement. When you save money to tax-advantaged savings accounts like IRAs and 401(k)s, you can get a “catch-up” contribution after you are a certain age, meaning larger amount of deposits can get tax benefits.
For 2023, the annual catch-up contribution for an IRA is $1,000 for people over age 50. So, you can contribute $7,500 per year. The catch-up contribution for 401(k)s is $7,500 for a total of $30,000 per year.
Income to Delay Benefits
When a spouse delays retirement, they can also delay taking other retirement-related benefits aside from Social Security. The couple can rely more on the income from the salary to meet their daily necessary living expenses instead of income from retirement accounts.
This way, the couple can potentially put off using the money in their nest egg, which will allow their investments to continue to grow.
Another major factor to consider when determining when to retire is health insurance. Individuals become eligible for Medicare at age 65. If a spouse plans to retire before age 65 to retire with an older spouse, they may need to find alternative health care. Otherwise, they could delay retirement.
Best Way to Staggered Retirements
Every couple will have a different financial scenario as well as different lifestyle goals. So, the right time for each member of a couple to retire will vary. In many cases, if even one spouse delays retirement, the couple could see financial benefits.
“A delay of five years is a hugely positive move for couples who are just on the edge of having enough money saved, for those who have a family history of longevity, or for those who simply need to work five additional years to get to ‘enough,’” says Jane Nowak, CFP, financial advisor with Wealth and Pension Services Group, in Smyrna, Ga.
Let’s look in more detail at a hypothetical situation in which staggering retirements with one member of the couple working five years longer provided a significant financial benefit.
Example of Staggered Retirements
Consider a couple, Larry and Sally Griffen, who are both 60 years old. They each earned an average of $40,000 per year during their working years. Both are planning their finances to support them until they are 90.
Larry and Sally both plan to retire at age 65. At their current rate of saving, the couple will have $300,000 of joint retirement assets by that time. When each reaches full retirement age (for their birth year), at age 67, they will be entitled to full Social Security benefits.
The Griffens expect to receive $24,137.75 per year in retirement from their account, with a depletion of assets by age 90. If they claim Social Security benefits at 67, Larry and Sally can each expect an annual benefit of approximately $18,850.
This would bring their total annual retirement income up to approximately $61,837.75 per year, a roughly 30% drop in income from their $80,000 pre-retirement income.
With One Person Extending Retirement
But if Larry were to work for another five years, he could step up his contributions to accumulate another $30,000 in his retirement plan and would draw on it for five fewer years.
If the Griffens are able to postpone any retirement plan distributions until Larry retires at 70 (since he will still be earning a salary), and Sally begins taking Social Security at age 67, they could reasonably expect to have a total of about $437,000 in retirement assets.
Larry will also get enhanced Social Security benefits of $28,332 per year (instead of $18,850). If their investments continue to grow and they still deplete their assets at age 90, their total annual retirement plan distributions would total about $83,182, effectively replacing the income from their jobs until age 90.
Note
Good retirement timing can mean the difference between a financially secure retirement and one with financial hardship.
Benefits to Retiring at the Same Time
Not every couple needs to stagger their retirement. Many people look forward to activities like travel during retirement that they won’t be able to do together if one spouse or partner is still working. Retiring in tandem can also reduce feelings of resentment that can arise when one person continues working.
Couples who are financially secure enough to meet their retirement goals may find no significant benefit to delaying the retirement of either spouse or partner.
How Much Should a Couple Have Before Retiring?
How much a couple should have saved before retiring will depend on their other income sources, living expenses, and their lifestyle goals. Some financial experts recommend couples plan to replace 70% to 90% of their pre-retirement income before they retire with savings, Social Security, or other sources of income.
Do Married Couples Receive Two Social Security Checks?
Married couples receive two Social Security checks based on their earnings and time of their retirement. One spouse’s Social Security check has no impact on the amount of the other spouse’s Social Security check.
How Long Can I Delay Social Security?
You can start to take Social Security as early as age 62, but the longer you delay taking your benefits, the more benefits you receive, up until age 70 as of 2023. After age 70, there is no financial benefit to delaying your Social Security benefits.
The Bottom Line
When couples stagger their retirement dates, they can potentially get financial and emotional benefits, but the right time to retire will vary for everyone.
“A staggered retirement date is a great idea for financial and marital health reasons,” certified financial planner Kristi Sullivan of Sullivan Financial Planning, LLC, said. “Financially, it allows you to more slowly draw down assets in early retirement. Also, not retiring at the same time can let couples find their groove in retirement without being on top of each other right away.”
Planning your retirement timing in advance can help make it easier to achieve your financial goals. Consider consulting with a professional financial advisor to guide you through your retirement options for your specific situation.