One of the biggest tactical mistakes that couples can make as they approach retirement is to retire at the same time without thinking critically about this decision. Couples often dream of the day when they can stop working and spend time together, but this is not always the best way to maximize your joint income down the road when you truly need it.
You should begin the conversation with your partner early to figure out what makes the most sense for you and to align your retirement expectations accordingly. Staggering your retirement can increase the amount of savings you have for retirement while reducing the number of years you draw on that savings. Beyond this, a staggered retirement can have benefits in terms of health insurance and emotional wellbeing.
Regardless of where you and your spouse are in the retirement planning process, now is the time to consider whether to retire in tandem with your mate. Here are some of the most important considerations when considering whether to retire concurrently or in a staggered manner:
The Benefits of a Staggered Retirement
For the most part, there are a variety of reasons it makes sense for one spouse to work longer than another. For example, one partner can delay Social Security benefits past full retirement age to maximize that income, which ultimately serves as a financial benefit to both people. Plus, the income from a few additional years of work can mean the difference between a comfortable and a constrained retirement.
If you are not sure that you have saved enough, one spouse working a bit longer is often the right call. This also reduces the number of years that you depend exclusively on retirement savings, so the effect is even greater than you might expect. Just five additional years can make an incredible difference. Alternatively, the “retired” partner might work part-time, both to keep busy and to supplement household income.
The Question of Healthcare Coverage in Retirement
Another issue that you need to consider in relation to retirement timing is healthcare coverage. Americans become eligible for Medicare at age 65. Depending on the health needs of you and your partner, you may need supplemental coverage, which could be more expensive than the plan provided by an employer. Thus, you may end up paying more than you expect for insurance.
Moreover, if both partners retire when the older one turns 65, then the younger one will need to get private insurance to cover the gap until reaching 65 and becoming eligible for Medicare. Again, this could be a major unexpected expense if you do not do your research.
On the other hand, if one of the two people continues to work full-time, the couple will likely have coverage through that person’s employer. Employer-sponsored coverage may be more flexible and robust than Medicare, so this can benefit both members of the couple. It is important to note that, of course, an employer-sponsored health insurance plan might be more expensive than Medicare. The point is to do your research and figure out what makes sense.
The Emotional Side of a Staggered Retirement
Another point couples need to consider is that retirement often proves an emotionally complex time because people derive so much of their identities through work. When couples retire together, it can be a shock to be home together all the time suddenly. Work provides a degree of separation, and retirees often need to create new boundaries.
Often, couples find it easier if each person retires at a different time. This allows the partner who is comfortable with the current routine to provide support if the other partner finds the transition difficult. If both people go through a major change at the same time and struggle, it can result in unexpected friction that negatively impacts the rest of their retirement.
However, retirement plans often depend on both members of a couple being retired. For example, if you plan to travel, you need both people to be retired. Since you are healthiest and best able to travel from a physical standpoint early in retirement, it is important to have this conversation. Perhaps it makes sense to stagger retirement only by a year or two to maximize time together.
Having this conversation well before you approach retirement means that no one will be caught off guard. If you have a plan and stay on the same page, you set yourself up for success. Be flexible: remember that plans can change over time. Your health, family responsibilities, and hobbies certainly will.
You and your partner should also talk about any anxieties related to retirement. By keeping this out in the open, you can both be better prepared to support each other through this life stage. However, keep in mind that unexpected emotions or reactions could occur.