When you're married, it's not just your own needs you need to consider when planning for retirement; you also need to think about what your spouse wants out of their golden years. But what happens when you and your spouse have a sizable age gap to contend with?

It's hardly an uncommon set of circumstances. Nearly 20% of U.S. married couples have at least a six-year age gap between them, and about 9% of all married couples have an age gap of 10 years or more, according to the U.S. Census Bureau.

Large age differences become even more common in later-life, second marriages. About 20% of heterosexual, remarried men have a spouse at least 10 years their junior, versus just 5% of men in their first marriage, according to the Pew Research Center.

So, with that in mind, here are five retirement planning tips for couples with an age gap.

1. Communicate About Expectations

As is the case in every relationship, communication is key. But it becomes even more essential when it comes to your retirement. You and your spouse need to be on the same page when it comes to what you’re going to do and how much you’re going to spend.

Do you plan on moving somewhere warm? Maybe you want to buy a second home. How often will you travel? Are your grandchildren a big part of your plans? These are all things you need to consider and agree on.

And if there’s a significant age gap in your relationship, that opens up a whole new line of questioning: Do you plan to retire at the same time? What if one partner isn’t ready to retire? What will the retired spouse do with all their free time? How will one spouse’s retirement affect your income?

It’s easy to overlook these finer details, but without clear, honest communication about your expectations, you may start your retirement off on the wrong foot.

2. Align on Social Security

One of the most important considerations when you enter retirement is when to start collecting your Social Security benefits. Social Security eligibility kicks in at age 62, although, drawing benefits this early only enables you to receive them at a permanently reduced rate, meaning that even if you’re still receiving Social Security at age 82, you’ll receive your benefits at the reduced rate. To receive 100% of your Social Security, you need to wait to draw benefits until you reach full retirement age (FRA)—66 or 67, depending on when you were born. But if you wait even longer than FRA (up to age 70), you’re able to take out more than 100% of your benefits, as shown in Figure 1 below.

Figure 1: Early vs. Late Social Security Benefit Election

fra ssb 1

For illustrative purposes, the chart above assumes the recipient starts taking Social Security at FRA and receives $1,000 each month. As you can see, the amount you receive varies depending on when you start taking these benefits.

In an ideal world, you would wait until age 70 to start taking Social Security, but the age gap between you and your spouse may complicate that decision. There are a few instances when it might be the right move to dig into your Social Security benefits early—especially if only one of you is retired. Maybe you can’t live the lifestyle you want on one income. Maybe the retired spouse was the lower earner. Maybe you have a plan to withdraw those funds and immediately invest them to try to grow them for later in life.

Social Security Spousal Benefits

You may also find that it’s a more prudent financial move to claim Social Security off your spouse’s benefits. If this is the case, you can begin claiming spousal benefits at age 62, but your spouse must also already be collecting Social Security.

Additionally, there is an exception to this rule. You can claim at any age if you are caring for a child that is receiving benefits. That child must be:

  • Unmarried
  • Under age 16

A child may also claim on your benefit, but they must be:

  • Unmarried and under age 18
  • Age 18–19 and a full-time student (no higher than grade 12)
  • Age 18 or older and disabled from a disability that started before age 22

Keep in mind, if you claim spousal benefits before you reach FRA, you will still receive permanently reduced benefits.

3. Plan for Health Care Costs

Health care is one of the more overlooked expenses in retirement, and that can be doubly true if there’s an age gap between you and your spouse. Since the younger partner is most likely in better health and further away from needing any type of significant medical attention, it’s entirely possible that it’s not even on their radar. But the truth is, health care is one of the largest expenses in retirement, with couples age 65 and older needing, on average, about $295,000 to pay for medical costs—and that doesn’t even include long-term care (LTC).

If you’re about to retire, you might not think health care is much of an issue, since you may plan on Medicare covering your medical expenses. But the truth is, Medicare might not be the way to go. Not only can it be extremely complex, but it also likely won’t cover all your health care needs, forcing you to spend more of your own money.

If you're the older spouse and decide to retire at age 65, while you would be eligible for Medicare, you don't necessarily need to sign up for it right away. If your younger partner is still working and has access to a group health plan through their job, and you're entitled to participate in that plan, you can hold off on enrolling in Medicare and not have to worry about a Part B penalty.

Why would you choose your spouse's health plan over Medicare? For one thing, it might cost you less if its premiums are heavily subsidized. Additionally, that group plan might offer a wider scope of coverage, thereby lowering your out-of-pocket costs as a participant.

Although, since enrollment in Part A is free, it’s not a bad idea to enroll in it while still getting covered by your spouse’s employer plan. That way, if there are any gaps in your spouse’s coverage, they may be filled by Medicare.

All this is to say that while health care costs might not be top of mind, it’s a hard fact of life that you’ll need to consider as one or both of you enter into retirement.

4. Agree on a Withdrawal Strategy

How much do you expect to spend in retirement? The perception is that your spending will slowly decrease as you progress through retirement. But in reality, many retirees actually increase their spending shortly after retirement as they travel or check activities off their bucket list (these are often called the “go-go years”).

Figure 2: Retirement Spending—Expectations vs. Reality

expectation v reality

This is a key discussion for couples with an age gap, and it comes back to our first point about communicating your expectations. If the retired spouse has excess free time, they’re more likely to spend more money than they were in their working years. This is especially the case for people with expensive hobbies like golf and travel. You’ll need to be sure you’re on the same page about how much spending in retirement is reasonable.

Once you get that figured out, you need to make sure you can afford your lifestyle. Where is the money coming from? If one of you is still working, will that income be enough, or will you need to start taking distributions from your retirement accounts? If so, how much do you need to take from those accounts?

At age 72, you will need to start taking required minimum distributions (RMDs) from your qualified accounts like 401(k)s, 403(b)s and IRAs. But you can certainly start withdrawing from them even earlier if they’re part of your retirement income strategy. Just know that these accounts come with varying tax ramifications, and there are often rules for withdrawing from these accounts, so make sure you’ve done your homework and/or consulted your financial advisor before you rely on these types of distributions as a main source of income.

5. Get Your Estate in Order

No financial plan is truly complete without an estate plan. A comprehensive estate plan ensures your values and goals are met, simplifies the transition process for family members and limits unnecessary taxes.

Couples with an age gap will also want to get on the same page about their estate plan, especially if one partner’s life expectancy is shorter than the other’s. While each estate plan will be unique, there are some common goals and objectives, including:

  • Reducing the size of your taxable estate and minimizing or deferring taxation while also providing liquidity for the payment of estate settlement costs and taxes
  • Efficiently transferring assets to your heirs
  • Creating a legacy that includes gifts to charities, churches or other organizations

In a marriage with a significant age gap, one spouse (not always the older one) typically was married previously and has children. Many of these relationships have complicated family dynamics that often necessitate consideration on how to best manage the pressures from children of a previous marriage and an age-gap spouse. For these kinds of marriages, it’s essential to have a strong estate plan that balances the longevity issues related to a younger spouse with making sure children from earlier marriages are covered.

That’s why it’s a good idea to review your will, beneficiary designations, power of attorney designations, and any health care directives. In reviewing these documents, you may decide you need to restructure ownership of assets or beneficiaries, create one or more trusts, and even consider purchasing life insurance.

Retirement is supposed to be your golden years. That’s why it’s a good idea to get these conversations out of the way before you retire. And make sure you include your financial advisor, as they can help provide further insight regarding anything else that might come up in your retirement.

Dustin Obhas

Dustin Obhas

Vice President, Financial Advisor

CFP®, AIF®, Series 7 & 63 Securities Registrations,1 Series 65 Advisory Registration†  Dustin began his financial planning career in 2006 and has continued his financial accreditations with advanced studies. He is a CERTIFIED FINANCIAL PLANNER™ professional, one of the most prestigious designations awarded in the field of financial advice, and an Accredited Investment Fiduciary®, a designation grounded in best industry practices, that...Read More