Retirement is a time of transition. When one leaves the work place after a lifetime of employment, the effects can be jarring, even for those who have carefully planned for it. And as we all know, despite our best intentions, things don’t always work out exactly the way we’ve planned them.
One emerging phenomenon for a growing number of couples is that some spouses are taking separate paths into retirement. There can be countless reasons for this – from job loss or disability to age gaps or wage disparity. Or it could also be that one spouse simply desires to leave the workforce in order to pursue more personal passions, while the other spouse loves their job and wants to continue working.
Every individual – and every couple – has to make these decisions for themselves though in the process of planning for retirement, there are some issues that couples should be aware of if one spouse is planning to retire, and the other spouse isn’t ready to make that transition.
Assuming both spouses are working, staggering the dates of their retirement can have some benefits. For example, instead of arbitrarily choosing a date when both spouses would retire simultaneously, each partner can retire at the age that works best for his or her career – for instance, to receive the full value of their pension.
Also, some couples have difficulty adjusting to the shock of being without two incomes – an eventuality that will have to be faced when both spouses are retired. However, if one spouse continues to work, that financial disruption is lessened, and the transition to full retirement for both spouses is eased.
There are Social Security concerns as well. If one spouse continues to work and earn an income, then in all likelihood, they can delay applying for Social Security benefits. The longer they wait, the more they will receive at the time they do apply, up until age 70. For every year they hold off, their ultimate benefit amount increases by 8%. That can make a substantial difference in the monthly amount of their Social Security benefit when they finally choose to claim it.
Retiring separately also involves some challenges, including negotiating personal and financial priorities, and adapting to new roles.
Even if one spouse continues to earn an income, more than likely there will have to be some adjustments in the family budget. The loss of one income will dramatically affect the amount of disposable income available, and will probably prompt a careful review of expenses. Some spending will likely need to be curtailed or some projects or vacations postponed. Of course, all of this depends on the couple’s financial circumstances and how well they have planned for retirement.
Other challenges can be more personal. When one spouse is retired and the other is still working, often the retired spouse is at loose ends. Suddenly, they have all this time on their hands and frequently, they are not sure how to spend it. Often, the retired spouse will want the working spouse to retire so they can do things together, and this might result in some friction between them.
Plus, the retired spouse might feel cut-off from the network that was part of their working life. Often, there is a realization that former co-workers were a primary source of friendship and social activities. Also, for some retirees, there is a loss of personal identity. Making the transition from breadwinner to homemaker can be a challenging transition to navigate.
Planning and Communication are Key
According to a 2013 study from Fidelity, one-third of couples disagree about how they will spend their time in retirement. That’s a large number. One of the keys to overcoming that disparity is effective communication. There is no substitute for a willingness to jointly discuss all aspects of retirement – how will you spend your time daily; what projects or passions are important to you; where do you want to live; is traveling important; how much time will be spent with children and grandchildren; etc. The more these issues can be openly and freely discussed, the more alignment the couple can achieve.
Along with effective communication is effective financial planning. One of my favorite phrases (courtesy of my father) is, “Failing to plan is planning to fail.” Retirement planning should start early – the earlier the better – and by effectively planning for your financial future, you and your spouse can have the ideal retirement lives you imagined for yourselves, when that time comes for you both.
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.
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