Should You Join Your Spouse in Retirement?
(Bloomberg Opinion) -- If you’re in your 60s, it may feel like everyone you know is retiring. The number of older workers who quit amid the pandemic shot up, reversing a decades-long trend of lower retirement rates among Americans 55 and older. But what if your spouse is part of that everyone-you-know cohort? Before you decide whether to join the retirement ranks too, consider the following:
The financial equation is no longer as straightforward as "We’ve saved x" and "We expect to need y" for the next fill-in-the-blank number of years. Low interest rates and greater than expected inflation are moving the goalposts. The old rule-of-thumb about withdrawing 4% a year in retirement is no longer applicable, and some say 3% is more appropriate. That means you and your spouse may need about 25% more than previously thought.
Inflation headwinds aside, just coming up with an answer to how much a couple expects to need in retirement can be difficult, even for those who have been married for years. One spouse may have a costly one-off purchase in mind, an expensive hobby, or children or grandchildren from a previous marriage that he or she wants to help financially. Discussions about that, along with things like anticipated travel and potential relocation, are imperative when calculating future spending.
Wives contemplating retirement should keep in mind that they often have lower lifetime earnings than their husbands because they’ve generally been paid less, do more unpaid caregiving and have accumulated fewer hours of paid work. That translates into lower retirement wealth overall. Women generally have less money in employer-sponsored retirement plans or pension plans, and receive Social Security benefits that are just 80% of what men receive, on average. (Spouses can elect to receive benefits based on their own earnings or to split their spouse’s benefits.)
It’s also important to think about whether a spouse’s recent retirement was voluntary or involuntary. The answer could have emotional implications as well as financial ones for the couple to consider. For instance, research shows a forced retirement can increase the risk of depression in women. If it wasn’t by choice, there may be the need to claim Social Security benefits earlier, ultimately decreasing overall total benefits.
Spouses who are much younger than typical retirement ages may want to continue working. One study shows that retiring before an age deemed acceptable by cultural norms can put someone at a higher risk for worse health outcomes. But working well past a traditional retirement age generally doesn’t provide any health benefits.
Working spouses whose retired partners have health issues face a conundrum. They can either quit to be a caregiver, or may feel more pressure to keep working to pay for health-care costs. They should consider their own health, whether the couple has long-term care coverage and the amount of assistance a sick spouse needs.
Finally, think about the state of your relationship. If partners are close, share hobbies and want more time together, it may make sense to enjoy retirement simultaneously. Still, relationship expert and psychologist David Richo advises that partners in a happy relationship get no more than 25% of their needs from each other. Not working could disrupt that balance - making retirement a lot less enjoyable.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research. She's the co-author of "Rescuing Retirement" and a member of the board of directors of the Economic Policy Institute.
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