Consider needs of spouse when making retirement decisions

October 2, 2013 

I see a lot of people who are considering retirement, and if they are married, taking care of their spouse is a big consideration. I would heavily encourage all pre-retirees to make future plans with a “worst case scenario” mind set. For example, what would happen to your spouse if you were permanently disabled, needed long-term care or died?

Yes, I know these are not positive things to consider, but planning ahead will give you peace of mind. Here are some things for you to talk through:

• If you will have a pension: Please consider the survivor option, if your spouse does not have a pension of his/her own. I realize that this reduces the monthly income, but you have to consider the fact that you could die first, and this income may need to continue for your spouse.

If you’re struggling with this decision, get a calculator and run some scenarios. For example, if you take the full pension for your life only, and live 10 years, how much will be paid to you? Next, if you select the 50 percent spousal survivor option, and you live 10 years, and your spouse lives another 10 years, how much will be paid out? You may see that the future potential benefits, for both of your lives, are much greater than the cost of the monthly reduction.

• If you will receive Social Security: If one spouse has earned much more than the other, the spouse with the greater earnings history should consider delaying when he or she applies for benefits. This is because if the higher wage earner dies first, the surviving spouse (with the lower earning record) can receive the deceased spouse’s benefit as a survivor benefit instead of their own smaller benefit.

The higher wage-earner may even want to wait to take benefits until age 70. To see whether this makes sense for you, go to www.ssa.gov, and click on Retirement Estimator. Follow the prompts, enter your information, including your current gross income, and it will show you what you are estimated to receive at age 62, at full retirement age and at age 70. I did this today and it took less than a minute. Print out the results for each of you, and talk through this decision.

• If it currently takes both of your incomes, while you are working, to make ends meet, you have some work to do. Please run through the following scenarios. If one of you was temporarily disabled, or became permanently disabled, what would happen to both of you, financially? If you have disability insurance, when does it start paying, how much does it pay, and for how long? Would that income, combined with your spouses income, be enough to make ends meet?

If one of you died, what would happen, financially, to your spouse? How much life insurance do you have, and what would it be used for? Would it be spent on monthly expenses, would it be used to pay off debt, or would it be invested for the future?

I like to say, “Plan for the worst, and hope for the best.” Knowing that you are prepared for what may happen will give you both peace of mind.

Sherri Goss is vice president of Rosenberg Financial Group, Inc., with offices in Macon and Warner Robins. Contact her at 478-922-8100 or sherri@rfmoney.com.

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