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Financial matters for large age-gap retirement planning include retirement funding, Social Security planning, and health care costs. While estate planning for couples with age gaps focuses on selection of agents and fiduciaries as well as protection of the younger spouse’s assets from the costs of the older spouse’s long-term care.
Retirement planning. Imagine a scenario in which the older spouse is ready to retire, while the younger spouse is hitting her/his stride and doesn’t want to slow down. How should you coordinate your retirement dates? Don’t even try.
Staggered retirement dates can actually be an advantage. A younger spouse who continues to work might maintain employer health coverage until both partners are eligible for Medicare. Moreover, the younger spouse’s earnings can reduce the need to live off investments, helping to ensure that the nest egg lasts longer.
Social Security timing. This is more complex in an age-gap relationship. While generally you’d want to delay taking Social Security benefits as long as possible to lock in higher rates and survivor benefits, there are other considerations.
If one spouse takes benefits early, the survivor will collect the deceased spouse’s benefits at full retirement age or reduced benefits at age 60. The survivor may qualify for benefits on his or her own earnings history — it’s important to take into account each partner’s work situation to see whether either will be dependent on the other’s benefits.
Remarriage after age 60 may impact survivor benefits. A surviving divorced spouse may be eligible for a benefit if he or she had been married for 10 years or more.
Defined benefit pensions, which provide a monthly benefit based on average compensation and length of service, are not as common as they were, but if either partner has one, you’ll have to be especially careful in deciding if and how the other will be covered. Terms also are very specific about when you may draw these benefits. Survivor benefits for spouses are reduced — the survivor may not get the full payout that the employee would be entitled to.
Health care. The cost of health care is a real concern for people with long-term serious health issues. If you’re the older retiree close to being eligible for Medicare, but your younger spouse depends on you for health care coverage, this can create a problem. Your younger spouse may be forced to purchase private health insurance, which can be quite expensive. When one of you retires and the other is still working, that may put a crimp in your overall relationship, but can work for health care benefits. Here, as with other decisions, make sure any plan accommodates the partner with the longest life expectancy.
Estate Planning. If you’re the younger spouse, you should re-evaluate your estate plan and choices for fiduciaries and agents. It is likely that you will outlive your older spouse, or that your older spouse will become mentally incompetent while you are still young and active. Therefore, they may not be the best person to nominate for roles such as your trustee, healthcare representative, or conservator. Additionally, you should be aware of the potential costs of your older spouse’s long-term care and seek the advice of an elder law attorney to determine ways you can protect your assets.
Age gaps between spouses means wide variations in retirement dates, life expectancy, health, and other factors. By coordinating with legal and financial professionals, you’ll be able to create an estate plan for your circumstances.
