Even at its simplest, planning for retirement can be complicated by uncertainties. Planning for married couples only increases that complexity— and a significant age difference between spouses can make retirement decisions even more fraught for some couples.
In general, people marry someone close in age. In fact, on average, the age gap between spouses in the U.S. is just 2.2 years.1 But it’s important to remember that averages are not a reflection of reality for many people. Plenty of married couples have a larger age gap between spouses.
Differences in spouses’ ages can highlight concerns about health, life expectancy, and lifestyle expectations for both partners when it comes to retirement. In some cases, the discussion over when each person should retire can become a minefield of stress and emotions.
Vastly different retirement dates mean a couple should expect and plan for different experiences in their later years. Yes, each spouse can continue to pursue individual goals — yet they really need to plan as a couple for a fulfilling shared future.
To accomplish their goals together, couples need to pay close attention to portfolio withdrawal strategies, asset allocation and the possibility of long-term care, and give thoughtful consideration to their decisions about when to file for Social Security benefits. Delaying Social Security past full retirement age, as late as 70, can be a valuable move for some couples.
For example, a hypothetical couple in which an older husband has earned significantly more than his wife during his working career and both spouses intend to claim benefits based on the husband’s earning record may want to delay Social Security benefits. Doing so can mean bigger monthly checks during his lifetime and enhanced lifetime benefits for his wife. Of course, it’s important for couples to visit the Social Security Administration website to explore options and understand the impacts of their filing decisions.
Craft a Solid Plan
Longevity is an important uncertainty to consider in any retirement plan. For couples with substantial age gaps, a wise plan mainly focuses on the younger partner, the one with the longest life expectancy.
Here’s another hypothetical example: a 70-year-old husband and a 58-year-old wife; their portfolio should be built around the wife’s time horizon. While both spouses may have a similar overall life expectancy, their age difference points to the possibility of the wife living without her husband for more than a decade.2
Remember that income from Social Security needs to last throughout both lifetimes. In the case above, she likely faces a longer time spent in retirement than he, and once she reaches 70 (his age today), her life expectancy increases even more.2
If annuity or pension distribution is in play, the couple can create regular income throughout both spouses’ lifetimes by choosing joint and survivor benefits.
The longer time horizon of the younger spouse also suggests a more aggressive investment approach. That means continuing to include stocks in the mix, rather than just bonds, bank accounts, and money-market mutual funds. It’s also important to keep inflation in mind; the longer an individual survives, the more significant an effect inflation may have on their purchasing power.
Speaking of investments, don’t forget required minimum distributions (RMDs) when planning a strategy. Typically, qualified retirement accounts like traditional IRAs and 401(k)s require distributions at age 70½—though the SECURE Act adjusted that to 72 for people who turned 70 on or after July 1, 2019.3
However, a separate RMD calculation is applied if one spouse is at least 10 years younger than the older spouse and also the primary beneficiary of the other spouse’s plan.4 This calculation helps preserve assets for the younger spouse’s presumably longer lifespan by allowing couples to withdraw less money from the older spouse’s plan than is typically required when spouses are closer in age, or for individuals who are not married.
A Healthy Outlook
Health care costs can be worrisome, so the younger spouse may want to consider staying at a job, even if it’s low paying, if it provides valuable health care coverage.
Long-term care insurance can be expensive, but long-term care costs can be pricey too, reaching upward of $250 per day for a private room in a nursing home, for example.5 Coverage is typically most affordable when purchased in the mid-50s, which could mean the younger spouse is under age 50 at time of purchase. According to the American Association for Long-Term Care Insurance, the same initial long-term care coverage costs 49.9% more at age 65 than it would at age 55, and that increase in age can increase the risk of being declined or paying more for health reasons.6
It’s really important to plan ahead and have a reasonable understanding of health care expenses. Consider again the above example of the older husband and younger wife. When the older spouse starts Medicare and is paying out-of-pocket for private supplemental (or advantage) insurance, it’s generally more expensive than employer-provided benefits. Plus, more in-home health care may become necessary.
There are never any guarantees when it comes to health, so both spouses should be accountable for taking care of their physical, mental and financial wellness as they approach retirement age.
Emotional Conversations on Retirement Planning
No matter what age they decide to enter retirement, many couples don’t fully consider its emotional impact. For couples with a larger age gap, the transition into retirement can become even trickier.
Prior to an older spouse’s retirement, a heart-to-heart discussion should include all aspects of home life including shared responsibilities for chores, from walking the dog to vacuuming the living room to loading and unloading the dishwasher. How the retired spouse spends his or her time while the other partner is at work can carry a great deal of emotional weight. Without clear, shared understanding and expectations, resentments can quickly flare up.
More complications, and perhaps more emotions, can be involved when a couple with an age difference begins estate planning. Children from prior relationships may be part of the picture for one or both partners, especially in second or subsequent marriages. Many parents want their children to have a share of an inheritance, much of which may have been earned before a second or subsequent marriage. Plus, with an older spouse, incapacity planning and managing retirement accounts also take on more urgency.
The internet is loaded with statistics on average lifespan, both with similarly aged couples and couples with age gaps. But no one ever really knows how many years of retirement to plan for. Because retirement is a major life transition that affects both partners financially and emotionally, it’s important for advisors to encourage couples to keep communicating with each other through some of the tough conversations, including when it comes to paying for retirement.
You can also equip your clients with the right tools to help navigate the complexities of their important upcoming decisions and avoid regrets. Six Retirement Regrets You Can Avoid is a helpful infographic that addresses the challenges of saving for retirement, planning for healthcare expenses and more. You can access your copy by clicking the link below.
1Pew Research, Globally, women are younger than their male partners, more likely to age alone, January 3, 2020.
2Social Security Administration, Retirement & Survivors Benefits: Life Expectancy Calculator, Accessed June 10, 2021.
3IRS, Retirement Topics — Required Minimum Distributions (RMDs), May 3, 2021.
4IRS, Required Minimum Distribution Worksheet, no date.
5LongTermCare.gov, Costs of Care, February 18, 2020.
6American Association for Long-Term Care Insurance, Cost of Waiting To Apply For Long-Term Care Insurance Policies, 2021.