Imagine waking up to the shriek of your alarm clock, a full day’s workload spinning in your head.

Meanwhile your spouse rolls over, bids you a fond farewell, then drifts blissfully back to sleep. You’re sitting in traffic, running late for a meeting. Your spouse, on the other hand, is dreaming about a relaxing day meeting up with friends and getting a little exercise.

Now flip the scenario. You’re retired, home alone, as your spouse treks the daily commute to the office.

Most of the couples I advise want to spend their golden years together. When couples retire separately, it’s often out of necessity—job loss or a health problem. Sometimes a wide age gap makes it difficult for both of them to retire at the same time.

Retiring separately doesn’t mean giving up the dream of a happy forever after with each other. It may actually allow couples to ease into a new lifestyle a little more slowly, which can make the adjustment simpler, personally and financially.

Take advantage of the “sweet spot” years

When one spouse retires before the other, they’re often approaching what I call the “sweet spot” years—the decade between ages 60 and 70, prime years for tax and retirement planning. When one spouse continues to work, those years provide even more opportunities for couples to solidify their retirement plans.

Here are a few ways you and your spouse can take advantage of that time:

  • Agree on a strategy. Plan your approach. Will you take distributions from a retirement account? Will you live on one income and let your savings continue to grow? To decide if you need to keep saving, try this retirement income calculator.
  • Estimate your required minimum distributions (RMDs). At age 70½, the IRS requires you to take yearly distributions from your retirement accounts. Many retirees are surprised when RMDs push them into a higher tax bracket. To find out if this might be an issue for your situation, estimate your expected RMDs. If you need to, consider taking steps to reduce RMDs so you can keep your income (and taxes) down in retirement. See the next 2 bullets for strategies to reduce your RMDs.
  • Invest in Roth IRAs. Roth IRAs, unless inherited, aren’t subject to RMDs. Many high-income-earning couples don’t qualify to make direct contributions to a Roth. Eligibility starts phasing out at $186,000 per year for those married filing tax returns jointly. If your household income drops because you or your spouse retires, you may be able to contribute to a Roth IRA; however, you’re limited to a $6,500 contribution limit if you’re age 50 or older. You can also open a spousal Roth IRA for extra savings. If you aren’t eligible to invest in a Roth, you may be able to convert to a Roth.
  • Delay taking Social Security. If one of you continues to work, you may be able to delay taking Social Security. Consider this strategy: Take the lower-income-earning spouse’s benefits at full retirement age (66). Wait to take the higher-income-earning spouse’s benefits at age 70. Here’s why: Social Security benefits increase 8% per year to age 70. For most people, the increased benefit amount makes up for the cash shortfall by the time they reach their early 80s. As a couple, chances are one of you will live past that age. For some couples, it’s worthwhile to delay taking benefits for both partners. Instead, you can draw on your retirement accounts and lower your RMDs.
  • Lower the cost of health insurance. Employer-sponsored health care is a major perk for most employees. As retirement draws closer, it can mean the difference between retiring early and waiting. These benefits can continue to keep health care costs low, even if one spouse qualifies for Medicare. The reason: Medicare Part B, which covers outpatient doctor visits, requires you to pay premiums. If you receive benefits from an employer that has over 20 employees on the payroll, you may be able to delay taking Part B and save on those premiums penalty-free.
  • Continue funding your retirement plan. A reduced income can make it difficult to max out retirement savings. But contributing even a little helps. For example, if you contribute $150 biweekly for 10 years, those contributions could grow to $53,455, assuming a 6% return. If you stop contributing and allow those contributions to grow 10 more years, they could reach $97,256 with a 6% return.* Contributing these seemingly small amounts while one spouse works can provide more flexibility in your later retirement years.

Early retirement comes at a cost

Retiring separately doesn’t always benefit your financial situation—it depends if one spouse is retiring late or the other is retiring early.

If one spouse takes early retirement, you’ll have less time to accumulate more assets for that spouse. You may also have to draw on the assets longer, if the working spouse can’t cover his or her expenses.

Here’s another downside to consider: Early retirement can affect Social Security benefits. The Social Security Administration calculates your benefits using your highest income average over 35 years. If a retiree has less than 35 years of earned income, additional years average $0, which can significantly lower your benefit amount.

However, early retirement isn’t always a choice. Many people who find themselves out of the workforce over age 60 find it difficult to find a comparable job. When the other spouse continues to work, it can keep your retirement savings relatively intact.

Either way, it’s an adjustment

Retiring separately means making lifestyle changes, and some couples struggle with the adjustment. An equal contributor may feel insecure about not bringing in any income. A retired spouse may be envious of the working spouse’s career.

In addition, couples may plan to travel together in retirement. But if one spouse is still working, taking time off isn’t always feasible.

On the other hand, I’ve seen marriages strained when both partners retire together. Each partner needs to find a sense of purpose in retirement. When both spouses retire at the same time, the process can be more difficult. Planning and communication are key transitional components—regardless of when each spouse decides to retire.

In your retirement fairy tale, maybe you envisioned you and your spouse tossing your alarm clocks out the window together. But if your timing is slightly off, don’t worry. The arrangement doesn’t have to be long-term.

*This hypothetical example does not represent the return on any particular investment and the rate is not guaranteed.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • We recommend that you consult a tax or financial advisor about your individual situation.
  • Withdrawals from a Roth IRA are tax-free if you are over age 59½ and have held the account for at least 5 years; withdrawals taken prior to age 59½ or 5 years may be subject to ordinary income tax or a 10% federal penalty tax, or both. (A separate 5-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.)