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Retirement Planning Considerations for Spouses with a Significant Age Gap

In some things in life – love, in particular – age is a fairly meaningless number. When it comes to financial planning, however, age can begin to matter quite a lot. This is why it is exceedingly important for spouses with a wide age gap to have a long-term financial plan in place. As we collectively face a time of economic uncertainty, smart long-term planning can also offer you peace of mind.

Long-term financial plans include retirement planning, of course, and this is an area in which traditional advice often won’t work well for couples separated by a decade or more. If you and your spouse are in this scenario, you’ll need a retirement plan that can accommodate the needs of two different stages of life.

Let’s explore a few of the considerations that mixed-age couples need to be aware of for proper retirement planning.

Retirement Date

While there is no dollar figure tied to this decision, it’s a meaningful one, nonetheless. Are you and your spouse prepared to handle a lifestyle where one of you is working and the other is retired? Or, do you plan to retire at the same time in spite of your age difference?

There are no right or wrong answers here, simply individual preferences. It may not bother you at all if your spouse continues to work long hours in a fulfilling job if you have hobbies and friends to fill your days. Or, you may worry about feeling lonely or lacking purpose if your spouse works all day while you’re left to your own devices at home.

If you decide you want to retire at the same time, what does that look like? Will the younger spouse retire early? Will the older spouse continue to work a few extra years? Either scenario can work but identifying which you’re planning for will impact how you need to prepare financially.

Social Security Benefits

There’s a lot of strategies involved in deciding when to begin collecting your Social Security benefits, and it’s especially important for mixed-age couples. If the younger spouse collects Social Security benefits early, this will likely reduce their Social Security benefits for life – potentially by as much as 30 percent. If the older spouse earns more, it could make sense to delay the age at which they begin collecting Social Security because it will allow their already larger benefit to grow by about 8 percent each year up to age 70.

Your Investment Portfolio

Most couples begin moving their investment mix from a more aggressive portfolio to a more conservative one as they get closer to retirement. After all, it makes sense to transition from a growth-oriented strategy to a wealth-preserving one as you age. However, this mix can get tricky when one spouse is significantly younger. In this case, it might make sense to continue investing aggressively for longer than is typically recommended. This will allow your nest egg to benefit from a bit more growth potential in order to support the younger spouse down the road.

Your Pension

In a case where the older spouse will receive a pension, it’s smart to consider taking the joint-and-survivor payout option. While it’s true that this will reduce the amount that the older spouse can collect, it also preserves payments to the younger spouse even after the older spouse dies.

Permanent vs. Term Life Insurance

Term life insurance is popular because it is a cost-effective way to provide a benefit to your family in the event you pass away. However, an older spouse in a mixed-age marriage should consider a permanent life insurance policy instead. The death benefit will offer greater flexibility and is generally income tax-free when the policy owner dies. In addition, with permanent life insurance, some policies offer a rider that allows the younger spouse to receive an advance on the death benefit that can be used for long-term care costs. This ensures that the younger spouse won’t have to deplete retirement savings to care for the older spouse if health conditions arise.

Choosing What’s Best for You

While spouses with age differences greater than a decade have more to consider, there are still a variety of retirement planning options to suit the needs of any couple. The financial planning process is always beneficial, and even more so when a couple’s situation is unique in some way, so walking through the considerations above and planning strategically provides peace of mind.

If you’re interested in professional guidance while planning for your mixed-age retirement, let’s start a conversation today and ensure the needs of both you and your spouse will be met as you move forward in life together.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.