BY Howard Dickstein
It’s not unusual for two people with more than a few years age difference to find common ground and fall in love. Retirement planning for couples at different life stages requires extra thought to consider how their age disparity might impact their post-working years together. To ensure savings are maximized and both parties’ needs are met, consider the following items when planning your financial future.
Choose the age at which you each wish to retire. Assuming you both work, carefully consider if you and your spouse should retire together or stagger your retirements. Retiring together allows you to maximize your time together to pursue your retirement goals. Yet by retiring early, the younger spouse will miss out on future earnings — which may include employer contributions through an employer-sponsored retirement plan — that could bolster a longer retirement. Early retirement may also remove important personal connections and intellectual stimulation that help keep you both engaged and mentally sharp.
Hold off Social Security to get more each month. Social Security may be available as early as age 62, but you’ll receive a bigger monthly check when you wait until full retirement age. At a minimum, postponing retirement benefits until the older spouse reaches age 70 will ensure the maximum monthly check for the retiree and a surviving spouse, in the event of the retiree’s passing.
Keep more money working in your retirement accounts. You can start withdrawing money penalty-free from your IRA or 401(k) savings starting at age 59½, however, make sure not to deplete your resources. If you can afford to wait, your nest egg can continue to grow undisturbed another decade. At age 70½, the IRS Required Minimum Distribution (RMD) rules kick in for employer-sponsored retirement plans as well as traditional IRAs. Only Roth IRAs, funded with after-tax dollars, are exempt, once certain requirements are met. Keep in mind that if your spouse is 10 or more years younger, you can use the Joint and Life Expectancy Table on IRS.gov to calculate the percentage you must withdraw, which will generate a lower rate than what is required by the Uniform Lifetime Table. A lower rate of withdrawal can help your household reduce taxable income, particularly if you’re in a higher tax bracket because of a working spouse.
Ensure adequate healthcare coverage. The eligible age for Medicare coverage is 65. If one of you decides to retire at an earlier age, you’ll need to have savings set aside to purchase adequate levels of healthcare coverage on the open market.
Plan for the unexpected and the inevitable. All couples can benefit from an estate plan that includes a will, comfortable levels of life insurance and up-to-date beneficiaries. You may want to consider long-term care insurance for the younger spouse who is more likely to be alone in his or her advancing years. If this is a second marriage, make sure your current spouse is included in your estate planning documents.
Start planning sooner rather than later. The further away you are from retirement, the better you’ll be able to prepare for what’s ahead. Sit down with a professional financial advisor to evaluate the pace of your savings, projected retirement income and spending needs and other goals for your future. If you want to retire together, despite your age difference, make sure your planning provides sufficient income to support what may be a considerably longer retirement for the younger spouse.
Howard Dickstein, is a Financial Advisor and CERTIFIED FINANCIAL PLANNER practitioner ™ with Ameriprise Financial Services, Inc. in South Hadley MA. He specializes in fee-based financial planning and asset management strategies and has been in practice for 32 years. To contact him call 413-540-0374 or visit his offices at 130 College Street South Hadley, MA 01075