If retirement is something you’re thinking about, whether in the near or long term, we have a four-question quiz for you. There are no right or wrong answers. But if you answer yes to each of these questions, you should definitely keep reading. Ready?
- Are you a woman?
- Are you married to a man?
- Is this man older than you?
- Are you planning to retire when he retires?
So, why does it matter if you answered yes to all of these questions? Ainsley Carbone, Total Wealth Strategist for UBS, explains, “If a woman marries a man who is older than she is and they chose to retire at the same time, the woman will most likely have a longer retirement than her husband due to her longer life expectancy. While she’ll have more years to enjoy her retirement, this also means she will have more years to fund.” So, when a woman retires at the same time as her husband, she should be aware of how it can be more challenging for her to save for an equally comfortable retirement as her spouse.
Recent research by Nicole Maestas, Associate Professor of Health Care Policy at Harvard Medical School, explores the fact that, even given the age gap, married couples tend to retire at the same time. In her paper for the National Bureau of Economic Research (NBER), “The Return to Work and Women’s Employment Decisions,”1 she writes: “This difference in age at retirement seems counterintuitive since women have longer life expectancies and have shorter careers due to delayed or interrupted labor force participation while raising children.” So, at least from a financial perspective, “they should optimally retire at older ages than men,” she concludes.
Before you buy that condo in Florida and make filing for Social Security a couple’s activity, here are three facts—and a piece of advice—regarding marriage, work and retirement.
1. Lifetime income affects Social Security.
Your Social Security benefits are calculated by using your highest annual earnings over a 35-year period. These 35 years needn’t be consecutive, Carbone says. This is important for women, especially if they have taken time off to raise a family and have dipped in and out of the workforce. “If you’ve spent the majority of your career at a lower earning point, the later, higher years can make up for that,” Carbone explains. You can swap out the low-earning years for higher-earning years that tend to occur closer to retirement.
2. Women make the most money near retirement.
Maestas found that the gender earnings gap shrinks as men and women get closer to retirement. In fact, the years after mid-life are prime earning years for married women more than they are for married men. Men tend to be past their peak earning years just as women are arriving at theirs. This mismatched timing means that women who retire early may be giving up income, as well as the chance to swap out some of those lower-paying 35 years.
3. Consider delaying Social Security.
One way to look at delaying retirement along with Social Security benefits is that it’s one less year you won't have to fund in retirement, Carbone says. The earliest you can apply for Social Security is 62, but full retirement age is 66 or 67 (depending on what year you were born). Every year you wait after that until the age of 70, your benefit increases by 8 percent.2 If you are earning more in your 60s than ever before in your career, delaying by a few years can add up.
Delaying Social Security doesn’t mean you have to keep working. You can also retire with your spouse and simply delay filing for Social Security to enjoy the 8 percent increase. Of course, in order to do this you’ll first need to make sure you have enough resources to fund those years when you’re no longer working and aren’t yet receiving Social Security benefits. Maestas writes that “the potential gain in Social Security wealth alone is enough to place married women on nearly equal footing with married men in terms of Social Security wealth at age 70.”
4. Have conversations about retirement early and often.
“It’s not until people get much closer to retirement that they usually start thinking logistically about it—some couples even forget to discuss the logistics with one another,” Carbone says. Not only is it crucial to talk finances with your spouse, it’s important to prepare mentally and emotionally. Aside from finances, there are two significant changes you’ll want to prepare for: the amount of free time you’ll have and the amount of time you’ll have with your spouse.
“I’ve seen couples go into retirement with a great deal of excitement about not having to report to work on a daily basis. Then when those days finally come, they feel lost without as much structure and meaning to their days.” Taking on a new hobby or volunteering at some of your favorite charities periodically can be effective ways to maintain structure and introduce new meaning.
Retirement is a big transition for couples when suddenly they can spend all day, every day together after years of working and spending most of their days apart. While this is a wonderful change in lifestyle for many, discussing how you plan to spend this time with your spouse in advance will help make this transition more seamless.
Don’t assume that you and your loved one will retire together without first considering the advantages and disadvantages to separating your retirement dates. Subtle time differences, as we’ve explored, can offer several benefits for both spouses. Women, in particular, should pay close attention to one benefit of delaying their retirement, which can come in the form of much larger monthly Social Security checks. Consider having an open conversation with your spouse about what course will lead to the most comfortable, exciting and financially sound retirement.