Stagger Retirement Dates Between Spouses
The Center for Retirement Research indicates that only 20% of couples retire in the same year -- 50% still have one spouse working two years after the other spouse has retired. Often, one spouse retires before the other due to health problems or a layoff, not necessarily because the spouse chooses to retire early. No matter what the reason, keep these points in mind if you are in that situation:
• Try to minimize withdrawals from retirement accounts. Although you will only have one salary instead of two, it's best to minimize withdrawals while one spouse is working. It's a good opportunity to test your retirement budget and to try to reduce your expenses.
• Utilize all available benefits from the working spouse's employer. One of the most significant retirement expenses, especially if you don't qualify for Medicare, is health insurance. So, before one spouse retires, find out if that spouse is eligible for health insurance benefits through the working spouse's employer. If that spouse is not currently on that plan, find out how he/she can enroll. Does he/she have to wait for the annual open enrollment period or will retiring qualify him/her for coverage immediately?
• Delay Social Security benefits. Especially if you are retiring before full retirement age, it typically makes financial sense to delay Social Security benefits. For a significant number of married couples, the man is older, has higher earnings, and will not live as long as the woman. Because the surviving spouse can elect to receive 100% of the other spouse's benefits, it typically makes sense for the man to wait until age 70 to claim Social Security benefits, to provide his wife with the highest possible benefits after his death. On the other hand, there is usually no reason for the woman to wait beyond ages 62 to 66 to start Social Security benefits, provided she can claim benefits on her own earnings record. While the wife's benefits may be lower when her husband is alive, she will receive his higher benefits after his death.
• Consider all defined-benefit plan payment options. If you are lucky enough to be covered by a traditional pension plan at work, make sure to consider all the payment options carefully before selecting one. Typically, you will have numerous options, but your choice will be irrevocable.