How To Handle Your Finances When One Spouse Retires Before The Other

There are many upsides to being a two-career couple. But when it comes to winding down those careers and heading into retirement, a little extra effort may be required.

Consider this: you and your spouse probably have different end dates set for your work lives. If you aren’t the same age, one of you will likely decide to retire while the other continues to commute to the office. Or maybe one of you loves your job and isn’t ready to step away anytime soon. No matter the specifics, the bottom line is that you each may have your own individual retirement timeline.

And that’s okay. But it’s important to understand how your different timelines shape how your shared life in retirement will look. While it may seem cut and dry (“I’ll just keep working while my wife retires and things won’t change much”), the reality is that different retirement dates can cause couples trouble, if they haven’t planned in advance.

As with everything in married life, communication is key. Many couples don’t have conversations about the day in, day out specifics of what they want from their post-retirement lives. For longtime couples, they often believe their spouse knows what they want because of conversations over the years. But it’s crucial for couples to check in and make sure they’re on the same page.

So when’s a good time to sit down and talk? Retirement planning experts recommend broaching the topic of life after retirement five years before either spouse is ready to clock out for the last time. This proactive approach ensures neither you nor your spouse is caught off guard when a retirement date is set.

I have a method I use to bring the different retirement timelines to life for my clients, and it’s a simple one. I draw a line on a sheet of paper. Our chronology starts in 2017, and from left to right, we map out important financial years. When one spouse hits age 62 and becomes eligible to receive Social Security, we may choose to add in those monthly checks. At age 65, we pencil in Medicare. If either spouse has a pension, we chart when that benefit starts to pay income. Anyone looking to work part-time? We factor that into the timeline, too. You can check out the online version and map out your retirement timeline here.

No matter the specifics, there is a fundamental truth when one spouse retires and another continues to work: your household income will change. Sure, you’ll still be receiving a nice paycheck from the working spouse, and this continued income stream could allow you to ease into your retirement budget. But you should continue to be prudent with your money.

One financial maneuver that may benefit your bottom line is to delay signing up for Social Security benefits for the retired spouse. If you and your spouse can live comfortably on just the worker’s income, waiting until age 70 for the retiree to claim benefits means a bigger check each month from Social Security. Why? Because for every year you postpone taking Social Security, up to age 70, you can receive up to 8 percent more in future monthly payments. So holding off on claiming the benefit is a good way to boost income later in retirement.

Another point to remember is that even though one-half of your household is retired, the working half should keep up contributions to retirement accounts. The reasoning here is two-fold. If an employer offers a 401(k) match, you want to continue to take advantage of that free money. You also want to stay in the savings mindset. Additionally, the working spouse may be able to contribute money to the nonworking spouse’s IRA. In order to make a spousal IRA contribution, you must be married and file a joint income tax return, and you must have earned income of at least the amount you add to your IRAs.

While finances can become an issue of contention for couples when one spouse decides to retire, it doesn’t have to. A little talking and planning go a long way. And staying conservative with your money is the best course of action. Sure, you have the free time to do the things you love, and maybe even pick up some new interests. But, remember, free time isn’t always free. Travel and expensive hobbies can put a dent in your savings, and cause friction between your spouse and you.

The bottom line is that open communication and planning in advance for retirement can work wonders to eliminate stress and misunderstandings in married couples. After all, retirement is something you’ve worked your whole life to get to. When you and your spouse are on the same page (even if on different timelines), you can spend less time sweating the details, and more time enjoying your life as a retiree.

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