What are the biggest financial challenges for those couples retiring at different times?

Ralph
00:00:00

Have you ever wondered how married couples handle retirement when there's a significant age gap? You're probably thinking about when you and your spouse should retire, and if different retirement dates might strain your relationship or finances. Today, I'm going to share some real stories about couples who successfully navigated this challenge and show you exactly how they did it.

A listener asked this, they said, Ralph, my wife and I are seven years apart in age. How do we plan our retirement when we'll likely retire at different times? I'm going to answer that very question today on the show.

Narrator
00:00:33

Welcome to the Ask Ralph podcast where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your host, Ralph Estep Jr.

Ralph
00:00:54

I want to welcome you and thank you for joining me. And I truly appreciate the trust you place in me. Now yesterday's episode, we talked about finding joy in troubled times. We all could use some good ideas of how we can get to that point of finding joy in those troubled times. At the end of the episode, I really came down to it's all about maintaining your spiritual and emotional wellbeing. So I'm going to encourage you, if you missed it, you can check it out. Now I encourage you to go check it out.

All right. Well, we got a listener question from Michael, and Michael comes to us from Tennessee, and this is what he wrote. He said, "Ralph, my wife, Sarah is 57 and I'm 64. We're struggling with planning our retirement since I want to retire next year, but she loves her job and wants to work until she's 65. I'm worried about managing our income, our healthcare, and keeping our marriage strong during this transition. Can you help us figure this out?"

Well, let me just start by telling you, Ask Ralph is all about answering your questions. If you've got a question just like Michael, you go to justaskralph.com and submit your question right there. And don't forget, every Tuesday night, we go live at 7:00 PM Eastern time. You can get to it by going to askralphpodcast.com/live. Now, Michael, I'm going to get to an answer for your question. I'm going to give you some financial advice. I'm not sure I can help you with some of that marriage stuff, but we'll talk about some of those topics today.

Now Michael, your situation reminds me of a book, a great verse from the Bible. It comes to us from Ecclesiastes 4:9-10, and it tells us this. "Two are better than one because they have a good return for their labor: If either of them falls down, one can help the other up." And I thought about that verse, Michael when I said, you know, it perfectly captures why couples need to work together. You talked about it in your question. You realize there's this age difference, and you want to make sure that you can work, keep your marriage strong and get through those financial challenges. And I'm going to tell you this little, little teaser here. It does require some specific planning when timing is different. And, you know, a lot of people can't wait until it's time to retire, but you need to plan it accordingly.

Well, I'm going to share with you two powerful situations where I've helped couples navigate this issue. Let's talk about situation number one, and I call this the Thompson journey. Also, you could call it the bridge strategy. Let me tell you about this situation. My clients faced the exact same challenge you mentioned Michael. And this particular case, Jim was 66. He was ready to retire. He had worked in this executive position and truth be told, he was just burned out.

He said, Ralph, I've just had enough working. Now his wife, Marie, a little bit younger than him. At 58, she was just hitting her stride. She was actually a pediatrician. You know doctors, a lot of times, they go through so much schooling. They're just hitting their stride in their late 50s, so she just wasn't ready to retire.

But if you do the math, that's an eight-year gap. And that gap created somewhat we call interesting hurdles. Let me give you some specifics. So Jim's situation was he worked, like I said, in this management position, executive position. He had a generous pension. Because of his age, he was also eligible for Medicare. And that was one of the main worries.

The main worry they had was Marie's healthcare coverage. They were worried about that. You know, if they move to his retirement plan, the premiums will be $900 per month or more. And that's 900 more than what it would cost her to be on her employer's coverage. So you might be asking Ralph, what did they do?

Well, here's what they did. Jim started his pension and social security at 66. So in his particular case, he had reached full retirement age for him, so he started withdrawing on his pension and he started withdrawing that social security. Now, in this particular case, Marie stayed on her employer's health plan. Because to go on to his plan would have been, like I said, $900 more a month.

But the other thing that Marie did was she kept putting money in her 401(k) plan because our thought process is at 58, we wanted to keep boosting her retirement. And that was important to her because she had that age. She wanted to keep putting into that retirement plan. You might be asking Ralph, what was the beauty of the plan? Well, here's what the beauty was and think about this for a few minutes. Jim's pension and social security covered their basic expenses.

It covered the mortgage, it covered the utilities, it covered the car payments, it covered the fuel and the groceries and all that kind of stuff. And by using Marie's income because she was still working, they were able to delay touching their investments. So Jim didn't have to subsidize his pension and social security at all with some other investments they had because they use Marie's income and it delayed her touching their investments.

And if you listen to a show about a week ago, I talked about this retirement garden and how we plant this garden. We put seeds and we want them to grow and mature. Well by allowing Marie's continued putting money into their retirement, she was able to let that retirement garden grow. And we, it became what I called a bridge strategy. And if you think about it, here's what that really means. Jim's income was used to cover expenses. Like I said, those daily expenses, those monthly things that he had to pay for. Marie's income became what I called the opportunity fund.

That was for retirement, that was for travel and for special purposes. So you might be asking, Ralph, what did they avoid? Well, the biggest thing to avoid is the common mistake of relying on social security income only. And see to here's the thing. If you don't hear anything else today, you got to listen to me on this one. Social security is usually not enough to maintain your lifestyle.

You think it might, but it doesn't. And you've got to plan accordingly. And this particular case, this strategy was very effective. What we did was we took a problem and created a solution. And that's the whole thing here. Well, let me move on to the second situation. I'm going to call this one the Wilson's transition, or I also call it the two timeline strategy. Let me tell you about this particular situation.

So here's David. He was 62. He's a high school teacher. He was ready to retire. He said, Ralph, I've had enough with this daily grind. Now his wife was 54. Her name was Sarah. We have a lot of Sarah's today. And she was a small business owner. And their challenge wasn't just about money and that's the thing you have to understand. You alluded to it, Michael, in your question today. Many times, it's not just about money. It's about, and we'll talk about some of those things later in the show. But it's bigger than that.

There are a whole lot of different things going on. Now in this particular case, we had a different challenge. And in this particular case, David and Sarah had completely different investment approaches. And let me tell you, this was challenging. Let me explain to you why. Now, David, like I said, he's a schoolteacher.

He was a naturally conservative guy. He just wanted to make sure that he had very low risk. He wanted to shift all of his retirement, investments into bond. Something had real low risk. He didn't want to take that risk of losing it in the market. Now Sarah, at 54, she had many more years to work. And she hadn't put as much into her retirement.

So she needed that continued growth, and she wasn't going to get those things at those low-risk investments. So, what do we do? We did what I called a two-timeline strategy. Now, I don't do investments. I help people build a plan around their investments, but we work with their broker, and we broke their retirement down into basically two buckets.

And let me, let me talk you through this. We have what we call David's bucket and Sarah's bucket. Now David's bucket was all about immediate needs. He needed it to be stable. He needed to be income producing. He needed to be low risk because that's what he was concerned about. So for his bucket, the broker put them into government and corporate bonds, something that had very low risk. Now Sarah's bucket, as we talked about, she's 54. She's got more time before retirement. She wanted something that would grow, something that would continue to expand. So the broker put her into a mix of stocks. A lot of those were dividend paying stocks. So they brought in additional income. And you might be saying, Ralph, that sounds great.

But what was the breakthrough? Here's the breakthrough. Again, this is one of those things I want you to take away from today's show. They both realized they didn't have to do this overnight. It wasn't something they had to just do right away. It wasn't like they had to say, oh, I'm retiring tomorrow so we've got to do this, this and this before I can do it.

And like, in this case, like we said, David's pension, and early social security covered the essentials, covered the mortgage payment, covered the car payments, covered the utilities, covered the groceries, all those things. And then Sarah's business income help to fund their investments. And here's the beautiful result or you want to call it the beautiful takeaway. Because of this plan and doing it ahead of time, they were able to maintain their lifestyle and listen, that's the thing

I hear a lot of retired people talk about. I mean, I meet with a lot of retired people in my practice. It's very common for them to have financial concerns or for them to have tax issues. And the thing is I hear time and time again, their biggest worry is Ralph, are we going to be able to maintain our lifestyle? We like to travel.

We like to do this. We like to have our hobbies and all that kind of stuff. And that's where you have to plan. So in this particular, what I call situation number two, we were still able to work with her broker and Sarah was still able to grow her wealth so that she would have more money in retirement. So you might ask Ralph, what made these situations successful?

And that's really the million-dollar question. You know, you can do a lot of things, but what made these particular two situations successful. I want to tell you the biggest thing I think it was, was it was both of the couple's willingness to see retirement not as a single event. Like I said, if you think retirement is just going to be this bang, turn a certain age and you're retired, it's not going to be an effective strategy.

They saw it what I called as a gradual transition. And I think that's important. I think you've got to look at retirement as this transition period. There's a period before while you're planning for retirement. There's a planning while you're implementing your retirement. And then there's that post-retirement where you're living off the plans that you made.

And the other thing I think that was huge for them is they both learn to adapt their budgets. And this is a must. They had to coordinate their benefits. They had to understand health insurance.

But they had to think about, do they still have the capacity to put money away for retirement, especially with that age difference. They realize that they wanted to keep doing it, but the biggest takeaway of all, and I think this is the most important thing is they communicated openly. And that's the key to this whole thing, because you need to sit down and discuss your expectations.

This is a change. If both of you have been working for year after year, the dynamics of your marriage or your relationship are going to change. You got to talk about travel plans. What does that look like? If you've got one person that's retired and the other person who's still working, obviously that might impact travel plans.

So you've got to think through those and talk through those. You might want to talk about hobbies. You know, now that you're retired, maybe you've got a hobby. Well, maybe that hobby is going to cost some money. So you need to factor into that budget or that intentional spending plan, how you're going to handle that. And the other thing that these two couples did is they discussed their different needs and concerns.

You know, each of them had different strains and stresses. In these two particular situations, you know, the husbands wanted to retire. They were a bit older. They had worked, they had basically, they gotten burned out and he's like, you know, it's time to enjoy some retirement. But think about this. Not only is it about the financial side, but now they've got different schedules.

You know, maybe they were both getting up at 5:30, 6 o'clock in the morning and they had their schedule. Well now all of a sudden that's changing. You know, and they've got to figure out how they're going to, and this is what Michael, you talked about that I want to call it the soft side, not the financial side, but they talked about how they were going to live together in new ways, because everything was different.

I mean, you're going to have to ask questions, like, how do you balance chores now? Is there going to be a change? You know, if the husband's going to be home, is the husband going to be in charge of shopping and cooking and cleaning? Those are all things you've got to work through and have that clear open line communication because unfortunately, I've seen many situations where clients will come in after they retire and they're just completely imbalanced. They didn't have those discussions. They didn't really talk through the things that were happening. They didn't have clear expectations. You know, I had particular one client, you know, his wife retired earlier than him and he couldn't understand why she still wanted him to do some of the chores. And this is just something they needed to work through because here's the truth. This is a truth bomb. Retirement changes everything. You got to rewrite the rules. It's just a fact. We're going to talk about this in a minute, but you got to understand the healthcare options. And see, these situations, these became blueprints that I can use for anybody facing these situations and I'm going to share some action steps in just a few moments. But let me ask you a few questions. Do you feel overwhelmed with your finances? Do you feel like you're all alone?

Do you find, you're searching for that financial freedom. You're trying to escape that bondage of debt. Maybe you want to align your finances with your faith. You know, do you feel like you're living in this constant state of financial instability, like you're living paycheck to paycheck? Maybe you feel like you're frustrated, you feel hopeless, and you're stuck. Well guess what? There is hope.

And I want to invite you to join the Ask Ralph Show insiders group, because we've got a community of people who feel the same as you. These are people who are facing these same challenges. Maybe they're getting ready for retirement, or maybe they're just starting out their careers. They've got the same challenges that all of us face, but the difference is they're facing their finances and they're working to master their finances.

They're living their dreams, they're finding peace of mind. And they're not without those same pain points. But they're finding ways to balance their finances with their faith. And again, I want to invite you. The insiders group is sharing answers. We're sharing solutions, but most of all, we're sharing hope.

And that's what a lot of us need. And you can apply to join our community. Just go to askralphpodcast.com/group. There'll be a questionnaire there and I want to encourage you, so apply for the group, do it now and become a member of our Ask Ralph Insiders team. So I promise you some action steps and like I say, good intentions are useless, well I can't get it out today. Let me start again.

So like I said, good intentions are useless, unless you put them into action. So here's some action steps. Number one thing. Create a detailed timeline for both of your retirements. Lay it all out on paper. A lot of people say make a visual timeline. You might not have exact dates. You might not have exact times, but lay it all out what it's going to look like. Sort of a, you know, a visual timeline so you can see the big picture. The second thing, don't let this hit you unprepared. Number two is review your health insurance options. Cause this is the key. You've got to understand your Medicare concerns. This is one of the biggest struggles that I see retirement people going into is all of a sudden, they have this aha moment of, okay, I'm going to retire, but what does that look like for health insurance? You know, maybe you're going to look at Cobra, the Prama Cobra it's pricey. Same thing as we sold spousal covers, it was going to be $900 more a month. This is a big cost. So you've got to plan that ahead of time. So, like I said, number two is review your health insurance option. Number three, and this one is critical as well. I know I say a lot of critical things here, but when you're going into this retirement plan, there are some steps that you've got to take because if you miss them, you're going to be in trouble.

So number three is develop a social security claiming strategy, and there's a lot to consider. It's really complicated. A lot of clients have said to me, Ralph, I feel like it's a maze. I feel like I'm starting here, and I've got all of these things in front of me. I can't figure out how to go, but you've got to develop that smart planning strategy.

Look at your options. And I'm going to encourage you here because you can't just go out on TikTok or YouTube or go search Google and find the answer. This is where you want to list the help of an expert to assist you. The fourth thing I think that's really important you do is you've got to adjust your investment portfolio for different risk tolerances. This is where you're going to work with your broker, because everything has changed now. Your investment time horizon has changed. You've got to create that balanced portfolio. Like we talked about with that to income are broken in the two buckets. Maybe there's two different strategies you got to work with. You got to find that right mix. Think of it like this. It's like a recipe. You got to find those correct ingredients for that recipe to really taste good. The fifth thing I'm going to encourage you to do is create a flexible budget that adapts as income sources change.

We talk about it on the show all the time. It's having that intentional spending plan. You got to plan for this. If you don't plan, you will run into problems. My son says all the time, you don't plan, you're going to fail. And you got to have this plan that's flexible. You want to build in things that we talked about. Maybe you want to do a lot of traveling.

Maybe you've got some hobbies. And you want to balance that with your values. As a Christian podcast show, we talked about how your values are important. Maybe you want to be more generous. Maybe you want to do missions trips. Maybe you want to volunteer. You got to factor that all into that plan, and you've got to be aware and be willing to adjust it.

A lot of people call it your financial GPS. And that is really what it is. So again, that last thing I said is create a flexible budget that adapts as income sources change because they're going to change. You know, maybe you retire. I talked about this on the show a couple of weeks ago. Maybe you don't have this drastic return.

Maybe you quit your main job, but then you're like, Ralph, I kind of want to ease out of work. So I want to go get a part-time job or all of that needs to be factored in to your planning, because maybe you don't want to take social security right away. Maybe you want to start tapping into some investments.

Again, this is the time to meet with somebody with an expert. And have them help you. And here's the thing. It's my big takeaway from today. You've got to make a plan that works for you. Everybody's situation is different. There is no cookie cutter approach. There's no, okay. Ralph, you got to do it this way or you got to do it this way. It just doesn't work that way.

You've got to make a plan that works for you. And as I always say, enjoy the journey because you're about ready to go on a journey. And think about it. This journey started when you started your first job, when you started putting money into that retirement account, you've collected up or you've set aside that money for years.

Maybe you have it and you've done it the last minute. But here's the thing. You're on that journey. So I've got a question for you. What concerns you most in retirement planning? I really want to hear from you. Feel free to share your concern on our insiders group, which means you're going to go join it.

Like I said, that's at askralphpodcast.com/group. Or you can just go to justaskralph.com because I'd love to hear from you about that question. That's what concerns you most in retirement planning? It's a question we all going to deal with eventually. Now tomorrow, we're going to explore the world of Cash App.

Yes. It's going to be an exciting technology show. We're going to talk about what's the best ones out there. What's the best practice for using them. And what's the best part for you using them as safely and effectively. So you don't lose money like my client did. There's a little teaser here. I had a client lost $5,000 because of that.

So that's a show tomorrow that you don't want to miss. And until then, remember this. My passion is to help you achieve financial success. I want to see you live out your dreams. This is why I do this show. This is why I plan these episodes. And I want to see you grow in your faith, and I know together we can master your finances from that Christian perspective. So I was always end this show, I want to remind you to stay financially savvy out there, and it all comes down to this, may God bless you abundantly.

Narrator
00:20:16

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