In our article: Understanding How Longevity Impacts Your Retirement, we discussed how the Longevity Gap can impact a surviving spouse. Now let’s look at the retirement-planning challenges for couples with a significant age gap and strategies for solving them.
Deciding On A Retirement Date
Since first marriages continue to end in divorce at a rate of around 50%, it’s no surprise many federal employees have remarried during their career. In a study conducted by Pew Research, there’s a 10-year age gap in around 20% of remarriages and it’s more common for the husband to be older than the wife.
When this is the case, deciding on a retirement date that suits both spouses can be a challenge. One possible solution is to stagger when each spouse retires. This enables the younger spouse to work longer and contribute more to the couple’s retirement nest egg.
Deciding When To Claim Social Security
When the older spouse is the higher earner, one strategy is for them to delay Social Security until age 70 to receive the maximum benefit. This increases the survivor benefit for the younger spouse who will likely be collecting Social Security a long time. Keep in mind, if both spouses are collecting Social Security when one of them dies, the surviving spouse will only receive the higher of the two benefits.
“When your spouse is expected to live far longer after you pass away, the 50% election can provide them with more income.”
Electing FERS Survivor Benefits
Electing a FERS survivor benefit is especially important when a federal worker is considerably older than their spouse. Under FERS, you can have your survivor receive 50% of your base annuity (pension) when you pass away, or 25% of your base annuity. The reduction to your monthly benefit amounts to 10% for the 50% survivor benefit and a 5% reduction for the 25% survivor benefit.
When your spouse is expected to live far longer after you pass away, the 50% election can provide them with more income. Or, you can elect the 25% option and purchase more life insurance to provide for your younger spouse.
The Need For Long-Term Care (LTC) Insurance
The likelihood of requiring non-medical, long-term care in a nursing home increases as we approach age 65. With the nationwide cost of assisted living currently averaging $4,640 per month ($55,680 per year), the out-of-pocket expense can quickly drain your retirement savings. This can leave a much-younger spouse in dire straits when you don’t have LTC insurance especially if they need LTC after you pass away.
Connect with an FRC® trained advisor who can help you develop a retirement plan that addresses your unique needs.
