Knowing Your Current Financial Situation
Unfortunately, you can’t wake up one morning and randomly decide that you want to retire. Retirement takes an incredible amount of foresight, and this goes doubly when you have a spouse to consider. Long before you’re ready to retire, you should think about your expected quality of life after you’ve left the workforce. For instance, do you really need that four-bedroom bungalow on the West Coast, or can you be happy with a much less expensive home in the Midwest? Do you plan to spend the majority of your retirement around your local community, or do expect to spend it travelling the world? What about your grandchildren’s education? What about social activities? After all, it’s not recommended that you spend your best years in front of a television. Answering these questions is an important first step to you (and your spouse) retiring.
Once you’ve considered these things, it’s best to plug them in to a retirement calculator. One good rule of thumb is that, in each year of retirement, you have 70% of your pre-retirement income. This number makes the most sense if you’re already free from debt and living a lifestyle similar to the one you had while in the workforce.
If you’ve run the numbers and you can’t retire on your savings and investments, you may need to stay in the workforce longer or tweak your expectations for your quality of life in retirement.
The Challenges of Retiring Before Your Spouse
If you’re ready to retire, but your spouse is not, it’s most important that you consider the effects this will have on your family. Leaving the workforce earlier obviously means your family’s yearly income will be reduced. This can be a stressor on your spouse, who now has the weight of being the majority breadwinner in your household.
Retirement Savings Plans
One way to mitigate this stressor is for you to begin pulling from your 401(k) or other retirement savings plans. You could start supplementing your yearly income with these withdrawals. Before you go this route, you need to make sure you’ve saved enough to afford your entire retirement. You don’t want your savings to dry up while you still need them. Also, if possible, you shouldn’t be pulling from social security until the age of 70 (There are a few exceptions to this rule.). This will make your social security benefit 76% higher than it would be if you claimed it at age 62.
The Part-Time Job
Another way to prevent this sudden dropoff of income is to find a part-time job. It doesn’t have to be stressful or require long hours, but it may be just the thing your family needs to keep your finances afloat. There is some substantial pushback to this kind of thinking, though. Many Americans see their retirement as a time to stop working altogether, thinking of their careers as some kind of necessary evil that happens before a utopian retirement. But in actuality, work is incredibly good for us – in both physical and emotional ways – and this holds true in retirement. In fact, retirees who continued working were likely to have less stress, to exercise more and to sleep better. This doesn’t mean you should start a job that leaves you feeling burnt out, but rather, it gives you the opportunity to pursue your interests in a part-time career. In fact, this may be a perfect time to learn a new skill that you’ve always felt passionate about.
Furthermore, having a job will likely improve the overall well-being of your spouse. Simply knowing that you’re contributing to the family’s financial situation is a great way of easing tension in your relationship. The fact that you have made it to retirement age with a spouse by your side is a success in itself, so you should do anything possible to maintain the quality of this relationship as you enter retirement.
The Perks of Retiring Before Your Spouse
Retiring before your spouse has a few benefits that should be considered. First of all, your spouse may have an insurance plan with their current employer. In many cases, you could piggyback off of their insurance, thereby saving your family certain expenses until your spouse joins you in retirement.
There is also the opportunity to stagger your investments. Since your spouse is still bringing in a portion of the income, you won’t have to dip into all of your retirement savings plans as early. This means that your spouse’s portion of the investments will continue accruing interest.
Make a Plan WITH Your Spouse
Above all else, you must sit down with your spouse and discuss your retirement plans. When you’re married, retirement decisions mustn’t be made in a vacuum. Your husband or wife should know about your retirement long before you receive your last paycheck. Instead, take the time to run through the numbers with your spouse and explain the reason why you want to retire. Go one step further and plot out your plan for your life during retirement, including potential part-time jobs and a detailed explanation of the quality of life you both can afford. Show the different ways you can contribute financially and around the house. If you’re thinking about retiring before you spouse, make sure that you’re having an open discussion. As with all marital decisions, communication is key.
How are you and your spouse saving for retirement? Let us know in the comments below.
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