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Retirement Planning Challenges for Couples that a have Huge Age Gap

Retirement Planning Challenges for Couples that a have Huge Age Gap

Retirement decisions, many times, are always complicated, and to make it worse, a huge age gap between couples can translate to a wide retirement date, health, life expectancy, etc. As a result, much of the typical retirement advice might not apply to such a couple.

Many couples, about 9%, have an age gap that is up to 10 years or more. During retirement, it is common for these couples to feel lost. As a result, here are typical issues that age gap couples will experience and how to sync their retirement plans:

  1. Failure to agree on a Date for Retirement

The older spouse might be at the prime of their retirement, while the younger one might just be making sense at work with no retirement plans. In what way can they sync their retirement plan? Well, experts advise that they should not bother trying.

This problem might be a benefit for such couples. This is because if the younger spouse keeps working, he might keep the employer’s health coverage until both of the partners qualify for Medicare. In addition, such earnings remove the need to rely heavily on their retirement portfolio.

  1. Confusion on Social Security

Claiming social security is a pretty critical decision for couples with age gaps. The probability of the younger partner outliving the older spouse is high. At the same time, the benefits for the social security survivor can either break or make the retirement plan of later years.

Let us use the examples of a couple with an eight year age gap. Assuming the wife earns higher, the husband's benefit, when she gets to her retirement age, will be around half the wife's. The husband's life expectancy should typically guide the claiming decision of the wife because, at her death, he will get a survivor's benefit that is worth 100% of her benefit. The implication here is that the higher earner needs to claim their benefit only after getting to age 70, even if they have a short life expectancy. 

Meanwhile, the husband can project the age he will be at the death of his wife and use such for her basis for claiming since he will switch from his benefit to the higher survivor's benefit then.

  1. Not Knowing the Right Drawdown Strategy

Typically, age gap couples might have combined retirement that might last as long as 40 years. Also, their pension, social security, and other sources of income in retirement might span a decade or even longer. For people, in this case, there might be no legal advice on a safe retirement rate. As an example, some couples may be better off making massive portfolio withdrawals during their early retirement days even though such a drawdown rate will drop after other income and Social Security comes in.


  1. Possibility of Outliving Your Money

Age-gap partners with issues stretching their nest egg to take care of their communal life can get help from the IRS. For people with a spouse below ten years who is the main beneficiary of their IRA, you will have a reduced Required Minimum Distribution that you can withdraw from the retirement account after getting to age 70½. IRS Publication 590-B, Table 2 can help estimate the smaller Required Minimum Distributions.

If one of the spouses is still working and qualifies for the income eligibility limits, it is a good idea to reinvest any extra cash in Roth IRA for either or both of you. As long as one of the spouses has adequately earned income to take care of the contribution, it is possible to fund your Roth fully for both parties.

  1. Frightening Health Costs 

For a young spouse who prefers to retire before the age of 65, the Medicare-eligible age can be restricted by the health coverage cost. Sticking with a job, even a low paying job, is valuable for young spouses provided such a job has health care coverage. 

For long-term care, couples with age gaps have an advantage in that the younger partner will care for the older partner should they need to. However, the care needs (long term) of the younger spouse also need attention. 

An option is to purchase long-term care that covers the younger partner only. Also, the younger partner might use a part of the 401(K) to purchase a qualified longevity annuity contract, which will take care of possible care in the long-term.



Pat Raskob
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