Yahoo Finance 26% of US couples think they’ll retire together — but here are 3 reasons why staggered retirements can work well
Many couples envision retiring together, setting sail into their golden years side-by-side. Idyllic? Yes. Financially prudent? Maybe not.
More than a quarter (26%) of American couples still in the workforce believe they’ll retire at the same time, according to a report from Ameriprise Financial.
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However, the same report reveals a completely different reality for many current retirees, finding that only 11% of couples reported entering retirement together — while nearly 62% of retired couples staggered their retirements by at least a year.
The concept of staggered retirements involves one partner retiring before the other by a couple years, allowing for a more gradual transition into their post-work lives. This approach can provide significant financial and personal benefits, making it an attractive option for many couples.
Here’s what you should consider before making a decision.
What’s your retirement strategy?
Ameriprise’s survey of 1,500 Americans shared both the expectations and realities faced by both retired couples and those who plan to retire within the next decade.
One key finding: while the majority of couples plan to retire together, financial considerations haven’t necessarily been taken into account — chiefly, income stability, healthcare costs, and the size of their retirement nest egg.
For instance, the survey reports that 41% of couples have no formal financial plan in place heading into retirement, while 39% have no strategy for recreating their regular paycheck after they’ve left the workforce.
Additionally, the overall economic environment is a source of anxiety for more than half of those surveyed — 67% are most concerned about high inflation, while 66% cited healthcare costs as their biggest worry.
Is a staggered retirement worth considering?
Although many American couples may be tempted to bid adieu to their careers simultaneously, it might be more financially sound to take the staggered approach.
Here are a few pros of a staggered retirement.
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An increase in savings
When one partner continues to work, the household maintains a steady income stream, which can help cover ongoing expenses and healthcare costs.
By delaying one partner’s retirement, couples can also benefit from the continued growth of their retirement accounts. For example, the working spouse can continue to contribute to their 401(k) or IRA, taking advantage of employer matches and compound interest.
Let's say one partner works for an additional five years and contributes $6,000 annually to their IRA with a 7% annual return. They could add approximately $35,000 to their retirement savings, significantly enhancing their financial security.
Staggering can really pay off when it comes to Social Security. It’s widely understood that delaying Social Security benefits can significantly boost your payout down the road.
So when one partner continues working for a few more years, both partners can rely on their current income and put off Social Security for a bigger benefit later.
Nearly 600,000 retirees start collecting Social Security benefits at the earliest eligibility age of 62, which has significant implications for their monthly checks.
Data from the Social Security Administration shows that, at the end of 2023, those who started getting benefits at 62 received an average monthly payment of $1,298.
However, retirees who waited until the full retirement age of 66 received significantly higher average monthly checks of $1,740. Those who retired at 67 received $1,884.
Access to employer-sponsored health insurance
According to a survey by Fidelity Investments, as of 2021, American couples aged 65 and over would need about $300,000 saved for health care costs through retirement.
For more context, this is a staggering 88% increase since 2002.
However, a partner who continues to work longer often retains their employer’s health insurance plan, which can provide comprehensive coverage at a lower cost than individual plans available on the open market.
Employer-sponsored plans frequently offer better coverage for medical procedures, prescriptions, and preventative care, contributing to overall well-being and reducing out-of-pocket expenses.
If the working spouse’s employer covers 80% of health insurance premiums, for instance, the couple could save thousands of dollars annually compared to purchasing individual health plans if they retire together.
Gradual adjustment to retirement lifestyle
According to a study from the National Library of Medicine, retirees are more likely to experience depression compared to older Americans still in the workforce.
To help offset these potential challenges, having one partner retire first may help with the transition. It can allow the couple to gradually adapt to the new lifestyle — helping to establish new routines and explore new interests without the added pressure of both partners navigating this transition simultaneously.
The retired spouse can explore volunteer opportunities, part-time work, or other pursuits while the working spouse offers financial and emotional support during the transition.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
