When Retiring Together Doesn't Make Sense

FILE - This Feb. 2005 file photo shows trays of printed social security checks, in Philadelphia, waiting to be mailed from th
FILE - This Feb. 2005 file photo shows trays of printed social security checks, in Philadelphia, waiting to be mailed from the U.S. Treasury. More than 56 million Social Security recipients will see their monthly payments go up by 1.7 percent next year. The increase, which starts in January, is tied to a measure of inflation released Tuesday. It shows that inflation has been relatively low over the past year _ despite the recent surge in gas prices _ resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975. (AP Photo/Bradley C. Bower, File)

Back when people from my parents' generation were first planning their lives together, most married couples looked forward to working hard for a few decades, buying a house, raising a family and then retiring together while they still had enough money and energy to travel and pursue favorite hobbies.

Some couples do manage to pull this off and thrive; but for many others, any of a host of obstacles can block their ability to retire at the same time. For example:

  • Thanks to periods of unemployment, home-value decline or 401(k) account loss suffered during the Great Recession, many couples simply don't have enough money to retire together comfortably.
  • If there's a significant age difference, one spouse may not have accumulated enough Social Security credits to qualify for a benefit by the time the other is ready to retire -- especially if one spouse took several years off to raise the kids.
  • Women often worry that the couple haven't saved enough since they're statistically likely to survive their spouses -- often for a decade or more.
  • One spouse must continue working to supply employer-provided medical coverage until both reach Medicare eligibility age (65 in most cases). Beginning in 2014, insurance companies will be required to sell coverage to everyone, regardless of preexisting conditions, but no one yet knows how expensive those policies will be.
  • Adult children keep borrowing money to help pay their bills.
  • One spouse is just hitting his or her stride, career-wise, and isn't ready to slow down.

Among couples who have managed to save enough to retire together, when it comes time to pull the trigger many realize they haven't fully agreed on where or how to retire; or they discover that their wishes have diverged over the years. This can put tremendous strain on a marriage if you're not willing to compromise and talk things through.

Long before you actually retire, ask yourselves:
  • Should we downsize to a smaller dwelling or even move to a retirement community?
  • Sell the house, buy a trailer and live like nomads for a few years?
  • Move to a warmer climate or to be nearer our grandchildren?
  • Move to a state with lower taxes or cost of living? If so, how comfortable are we moving somewhere without a network of friends?
  • Start a small side business to keep money rolling in?
  • Are we finished supporting our children financially?
  • How involved do we want to be in our grandchildren's care -- full-time babysitters or occasional visitors?

Even before asking those tough questions, you already should have begun estimating your retirement income needs. Some financial planners suggest people may need 70 percent or more of pre-retirement income to maintain their current lifestyle, but it's difficult to generalize. These online calculators can help:

After you've explored various retirement scenarios, consider hiring a financial planner to help work out an investment and savings game plan, or to at least review the one you've devised. If you don't have a personal referral, good resources include the Certified Financial Planner Board of Standards, the National Association of Personal Financial Advisors and the Financial Planning Association.

Make sure you understand the financial impact of the age at which you begin drawing Social Security benefits. To make ends meet, many people begin drawing reduced benefits before reaching their
(65 for those born before 1938 and gradually increasing to 67 thereafter). This can have several costly consequences:
  • Your monthly benefit will be reduced by up to 30 percent. (Conversely, if you postpone benefits until after reaching full retirement age, your benefit increases by 7 to 8 percent per year, up to age 70.)
  • Although many states don't tax Social Security benefits, the federal government counts them as taxable income. So, depending on your overall income, you could owe federal tax on a portion of your benefit. See IRS Publication 915 for details.
  • If you begin drawing Social Security while still working, your benefit could be significantly reduced depending on your income. Read How Work Affects Your Benefits for more details. Rest assured, however: Those reductions aren't truly lost since your benefit will be recalculated upward once you reach full retirement age.

Along with the financial impact retirement will have on your marriage, keep in mind that this may be the first time that you've been together, day in and day out. Many people are so consumed by their jobs that they haven't taken time to develop outside interests and hobbies. Well before retirement you and your spouse should start exploring activities and networks of friends you can enjoy, both together and independently. Consider things like volunteer work, hobbies, athletic activities or even part-time employment if you miss the workplace interaction and need the money.

And finally, if your plan is to have one spouse continue working for a while, try living on only that one salary for a few months before retiring as an experiment. This will give you an inkling of how well you'll do financially and whether you might both need to keep working to amass more savings.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

To participate in a free, online Financial Literacy and Education Summit on April 17, 2013, go to Practical Money Skills for Life.