If you and your spouse are nearing retirement age, it’s important to consider the timing. Should you both retire at the same time, or would it be better to stagger your retirements for financial reasons? If you’re not sure what the best approach would be, here are some points to discuss with your partner so you can make an informed retirement decision together:
Retirement savings and income goals
Before making a retirement decision, review your retirement savings goals. If one spouse delays retirement, will this help you move closer to those goals or provide extra security? For example, Investopedia contributor Mark P. Cussen notes that the spouse who remains in the workforce will be able to make retirement contributions for longer, increasing overall savings, allowing for extra investment growth, and improving annual income after both of you have retired.
Social Security benefits
Will Social Security benefits be making up a significant percentage of your retirement income? If so, delaying or staggering retirement could make sense. According to Cussen, if one of you keeps working for multiple years after reaching retirement age, their annual Social Security benefits could be significantly higher — contributing to a higher overall retirement income. It’s also worth checking into how staggered retirement lines up with Social Security’s spousal benefits. Bankrate writer James Royal notes in many cases, a lower-earning spouse who is at least 62 could receive payments in addition to what the retired spouse is receiving.
Health insurance is an incredibly important piece of the retirement timing puzzle. If you and your spouse are both the same age, it’s simple — you can both retire at age 65 and enroll in Medicare. But what if both of you want to retire at the same time and one spouse is under 65? That person will need to fill the gap between losing employer-provided health coverage and becoming eligible for Medicare. If buying insurance on the market is too large of an expense, it may make sense for one spouse to delay retirement and retain health coverage through their job.
As you discuss retirement timing, it’s important to have an honest conversation about life expectancy. If one spouse is likely to live significantly longer, you’ll need a strategy to ensure this person has enough retirement income to live on well after the other spouse is gone. In this case, it might make sense for the spouse who earns more to delay retirement as a way to bulk up savings.
Beyond finances, there’s much more to consider as you and your spouse discuss retirement timing. For example, if you’re looking forward to traveling or participating in other retirement activities together, retiring at the same time will give you more time to do these things. It’s also a good idea to consider each spouse’s relationship to work. One of you might be excited to retire, while the other might miss fulfilling work or be unsure about how to spend time or what to do post-retirement. If this is the case, retiring at different times might make more sense.
Timing is a key element when it comes to a secure and enjoyable retirement. As you and your spouse plan for this stage of your lives, make space for candid conversations about how retiring at the same time or staggering retirements will contribute to your financial health and overall well-being.