According to a recent Ameriprise Financial study, more than a quarter of couples believe that they will retire together. The reality is that only 11% actually retire together. The same study shows that some 62% of couples choose to stagger their retirement for good financial and personal reasons. The decision to retire is a personal choice, with many factors that must be taken into account:
- The first step is to consider income stability, health care costs and the size of your retirement nest egg. When one partner remains in their job, they continue to have an income to pay for expected household expenses and health care costs. By delaying retirement, the working spouse can continue to grow the nest egg by contributing to employer-supported retirement programs. Depending on yearly fund earnings, this can have a significant impact on the size of your 401(k) or individual retirement account.
- By delaying retirement, you can also put off taking your Social Security benefits. If you wait until you are 70 years of age, you will receive the largest possible payout. For example, those who started collecting Social Security at age 62 received an average monthly payout of $1,298. Compare that with someone beginning to collect at age 66. That person will enjoy a monthly $1,884 on retirement. The difference is significant when you consider the number of years ahead.
- By continuing to work, one of the spouses retains their company health insurance plans. Fidelity Investments estimates that couples aged 65 and over will need $300,000 in savings just to cover health insurance costs after retirement. Employer-sponsored health plans usually provide better coverage for medical procedures, prescriptions and preventive care, reducing out-of-pocket expenses.
- Beyond the financial considerations are also the personal and emotional ones. Research shows that retirees are more likely than their working counterparts to experience depression. One way to offset this possibility is to have one spouse retire first to establish new routines in this new lifestyle. In this scenario, the working spouse continues to support both themself as well as the retired spouse both financially and emotionally. This should make the transition to full retirement easier for both. You have the opportunity to see what life is like to live on one income. Will you need to reduce your spending? Should the retired spouse seek part-time employment to help make ends meet? Do you need to sell your home and downsize your lifestyle?
- In the case where one spouse loves the work that they do, they should continue to participate in the workplace. There is a lot to be said for deriving emotional satisfaction and stimulation from your career. It is no longer that unusual for people to continue to work after they reach the traditional retirement age.
Get professional advice
It is important to have a retirement plan in place for each spouse. However, it is important to be flexible, knowing that life can throw you a curveball and that plans can change. Consult with a professional financial planner to help you assess your retirement plans and financial stability.