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Financial Planning Considerations for Couples With an Age Gap

Couple with age gap needs financial guidance

6 Challenges and Tips for Navigating Them

Financial planning is never easy, but couples with a significant age gap face additional complexities due to differences in retirement eligibility dates, life expectancies, health issues, income needs and more. This means standard planning advice doesn’t always work well for couples with an age gap.

Following are six challenges for couples with a significant age difference, as well as strategies to help you navigate them.

#1 – Staggered retirement dates

Couples with a significant age gap may find themselves juggling different retirement dates. The older spouse may be ready to retire while the younger spouse is still enjoying his or her prime earning years.

The key to solving this challenge? Don’t even try!

From a financial perspective, there can be significant advantages to staggering your retirement dates. For example, the working spouse may be able to maintain employer-sponsored health insurance until both partners are eligible for Medicare. And any earnings that continue to come into the household can reduce the need to draw from retirement assets, therefore preserving the couple’s retirement savings.

Of course, if the lifestyle challenges of having one working spouse and one retired spouse are too much, consider a compromise. Perhaps the older spouse takes a part-time job for a few years and the younger spouse wraps up his/her career a few years earlier than originally planned.

#2 – Timing Social Security

Properly planning for Social Security is especially critical for couples with an age gap, because the younger spouse has the potential to live significantly longer than the older spouse. This means the younger spouse may need to rely on a survivor benefit for an extended period of time.

If the older spouse is the primary earner, it may make sense for him/her to delay taking benefits until age 70. Doing so allows the Social Security benefits to grow by 8% each year, which can also result in a higher survivor benefit for the younger spouse.

In contrast, it may make sense for the younger spouse to begin receiving Social Security benefits as soon as possible, even if that means taking reduced benefits beginning at age 62. By doing so, the couple can receive as many years as possible of the younger spouse’s benefits. Then, when the older spouse passes away, the younger spouse may be eligible to receive survivor benefits at the older spouse’s higher rate.

#3 – Investment allocation

Typically as you near retirement, you begin to shift your investments from a growth-oriented strategy to a more income-oriented strategy. However, if there’s a significant age gap between you and your spouse, it may make sense to maintain a slightly more aggressive portfolio than your same-aged friends.

Remaining more aggressive provides your investments with additional time to stretch and grow, which will hopefully protect the income needs of the younger spouse later in life. And, because the younger spouse has a longer time horizon, he/she may have a better opportunity to recover from market volatility, should the value of your investments decline.

#4 – Life insurance

It often makes sense for an older spouse to implement a permanent life insurance policy that pays a tax-free death benefit to the younger spouse. Some policies even offer a rider to help pay for the costs of long-term care, which can take some pressure off the younger spouse, should the older spouse face health issues later in life.

#5 – Pension payments

If the older spouse is eligible to receive pension payments, it may make sense to elect a joint-and-survivor payout option. While this practice typically reduces the amount of the monthly payment to the household, it also helps ensure the younger spouse can continue receiving payments for the rest of his/her life, even after the older spouse passes away.

#6 – Estate planning

Estate planning for couples with an age gap can be especially complex. It’s important to take steps to ensure the younger spouse will continue to be financially secure following the older spouse’s death. Work with your wealth manager and estate planning attorney to implement the necessary documents, including wills, trusts, financial powers of attorney and healthcare powers of attorney. This will help ensure both spouse’s wishes are properly reflected in your estate plan.

Could you use some help planning for your financial future as a couple with an age gap? Creative Planning is here for you. Our goal is to provide you with the confidence of knowing you’re on track to achieve your financial goals. To do so, we integrate the various aspects of your financial life into a comprehensive plan specifically designed to help you achieve your version of financial freedom. To learn more, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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