Holland Column

Retirement & Financial Planning

Holland Financial

Social Security and a Younger Spouse

People can, and do, meet, fall in love and get married – despite substantial age differences. Relationships like these are often called “May-December” romances. How does this disparity in ages affect a couple’s finances in retirement? Keep these two points in mind:

Social Security (SS). Many times, couples (regardless of age) choose to defer one spouse’s Social Security payments for as long as possible. This is because, if filing is delayed, SS benefits will increase until age 70. Another reason is, when the husband/wife who has deferred payments passes away, his/her spouse will be entitled to that person’s larger benefit payment at full retirement (the couple must have been married for 9 months). If you are part of a May-December couple, you can see why this could be a very important planning option. Let’s look at a fictitious example:

Jon is 64 and currently employed in a middle management position. He decided not to take an early retirement at age 62. Jon’s wife of three years, Marie, is 48 and does not work; she has held a few short-term jobs over her lifetime, but was unemployed for many years while caring for her disabled mother. If Jon either continues to work, or has other income to sustain his and Marie’s lifestyle through age 70, not only will his benefit increase, but, subsequently, Marie would get a much larger “survivor’s benefit,” should Jon pass away at, let’s say, age 74. If Marie expects her Social Security payment to be low because of her sporadic work history, taking the SS survivor benefit, instead, could make a huge difference as she moves forward on her own.

Pensions. Now, one more thing to keep in mind for this May-December couple. If Jon were eligible for a pension through his employer, he could choose to designate his plan to be “single life” or “joint life.” If Jon were to choose single life, he would receive pension benefits until he died, but Marie would not receive the pension after his death. Without proper survivorship planning for Marie, she could be left “in the lurch” with very little income as she enters into her golden years. On the other hand, if Jon were to designate his pension plan to be “joint life,” payments would continue for Marie, even after Jon passed away. A drawback to joint life, however, is that monthly payments will be lower because the pension is extended for both Jon and Marie’s lifetimes. Additionally, because of Marie’s younger age, payments would, typically, be reduced even more.

Death is not a topic anyone likes to talk about. And, planning for retirement can be complicated – even more so for May-December couples. But, if you keep this information in mind when considering the future of a surviving husband or wife, you will not only PlanStronger™ for yourself, but for your spouse, as well.

Have a financial question you'd like answered here? Email: Questions@PlanStronger.com