As a couple, planning for retirement is vital for enjoying a long, happy, and satisfying time after leaving the workforce. But one of the most important questions that all couples must answer is whether to retire together or to retire at different times. To help you find the right path no matter which choice you make, here are a few key steps to take in order to reach each goal.
To Retire Together
If your goal is to retire at the same time, you'll first need to set a target date. This is a tricky issue, as it must successfully compromise both the emotional needs and financial requirements of both partners. One partner may need to wait a little longer or retire earlier than planned. Once you know the target date, work backward to find out how much money you need to have saved at this point and what more is needed to reach the goal.
Before you lose both sets of income, do a trial run by living off the same amount of money (on the same schedule) as you would when only accessing retirement benefits. If the test run reveals a shortfall, discuss some reasonable ways to make up for it. One person might be able to work part-time, for example, or do consulting work.
To Retire Separately
You have good reasons to set different retirement dates. Sometimes, one partner may not be ready to stop working when the other one is. And if you suspect that your retirement portfolio might not support the total loss of income, staggering the effects can help mitigate any financial worries.
Unless one party is determined to retire first, it's a good idea to calculate the effects of either party retiring first by designing some scenarios. Not all effects are going to be obvious. For example, if the lower-earning spouse has better health insurance benefits, it may make more financial sense for them to continue working and fill that gap until one or both spouses is eligible for Medicare.
You should also discuss how you will feel if one person can retire but not the other one. Retirement is an emotional issue as well as a financial one, after all. If it will cause any additional friction between marriage mates, you may want to pursue other options and wait until both parties are ready.
Need help running the calculations or determining how various options will affect your finances? Start today by consulting with an experienced financial planner where you live.