Retirement is a time of great change. Leaving employment after years of work has a major impact on how a person spends their days as well as their finances. At times, retirement doesn’t pan out the way we plan either. Events throughout our lives can have an effect and change even the most carefully planned retirements.
For example, though many couples plan to retire at the same time, this doesn’t always necessarily happen. This may be due to differences in age, earnings, job loss, disability, among other factors that weren’t considered during initial plans.
Sometimes, a spouse may also decide to retire early to enjoy personal pursuits if working longer only provides a minimal financial benefit. Yet, the other spouse may want or need to continue working, because it is rewarding, or it will greatly improve the couple’s overall financial position.
While retiring may be a very personal decision, it is still worth understanding the implications of various scenarios so that couples can make the choice that works best for them.
Benefits of Staggered Retirements
When both individuals work, staggered retirements are often beneficial. It ultimately allows each spouse to choose a date that optimizes their retirement benefits, so they receive the maximum amount available.
Staggered retirements also reduce the financial impact of moving from full wages to lesser pensions. It can be a major shock when a couple must suddenly cope with two reduced incomes. However, when one spouse continues to work, the couple can ease into this financial change gradually, while still enjoying a full life.
Additionally, when one spouse delays retirement it can lead to increased Social Security benefits, in the U.S., individuals can apply for these benefits up until the age of 70. Each year, waiting increases their benefits by around 8%, which makes a substantial difference in the monthly amount they ultimately receive when they do decide to claim.
Financial Challenges of Retirement
Whether you decide to retire simultaneously or stagger your retirements, facing various challenges is inevitable. Priorities, finances and personal roles are all subject to change.
Even if one spouse continues to work, the couple will need to adjust their monthly budget. Though one person working may result in fewer expenses, disposable income will undoubtedly decrease as well.
Consequently, cutting back and planning carefully for major expenses will be essential. This becomes even more applicable once the other spouse retires. Not planning or starting too late could be detrimental. However, proper financial planning provides one with the ability to maintain their current lifestyle. Instigating a plan early on is therefore instrumental for an affluent retirement.
Personal Challenges of Retirement
Couples will no doubt face personal challenges as well. Some people’s lives are inextricably tied to their employment which could lead them to struggle if they’re unable to find satisfactions in other areas.
No longer interacting with a work network can lead a person to miss many social activities and friendships. Some were previously so engrossed in their work that retiring comes with a feeling of lost identity. This is especially true if they played a leadership role in their later years. Tidying up the garage or planting a garden may not provide the stimulation needed to feel fulfilled or even satisfied. This in turn can lead to depression and isolation if the retiree fails to find new challenges.
Expectations can change after retirement as well. A spouse may want the other to start participating more in household duties and activities since they have more free time. Consequently, not connecting with others from work means that the retired spouse may also have a desire to do more things outside of the house in order to replace those connections.
These misaligned desires can lead to friction and unnecessary bickering, instead of a blissful and enjoyed retirement. Fortunately, this can be avoided with forethought, planning, and communication.
Importance of Planning & Communication
Despite years of living together, a couple’s outlook on finances and post- retirement activities can vary greatly. With so many factors at play makes it vastly important to prepare for retirement by talking about expectations, wants and various approaches to finance.
For instance, opinions and behaviours on spending and saving may vary for each spouse. One may be willing to invest in risky propositions, while the other would prefer a more conservative approach. One may want to buy a boat and sail the world, while the other may favour simply curating their garden.
Some couples avoid talking about these matters, because it can lead to undesirable conflict or tension. Nonetheless, these conversations are vital to an enjoyable retirement. Otherwise, resentment can fester and wealth management will be ignored.
Joint discussion regarding all aspects of retirement, including aspirations, passions, and financial priorities can help alleviate strain. Creating a comprehensive financial plan as early as possible also helps couples realize what’s most important to them and ensures they have the resources in place to do what they want when they retire.
Let us help you chart the path to a happy and fruitful retirement. As Benjamin Franklin said, “Failing to plan is planning to fail.” Contact us for a free consultation and let us help you plan for a successful retirement.