Crucial Discussion to Engage in with Your Partner Regarding Retirement Planning
Retiring is a significant life event that necessitates significant planning. Aheads of your retirement, you should be prepared to answer questions like how much you should have saved, your anticipated retirement age, and how long your savings will last.
Another important factor to consider is the role of Social Security in your retirement plans. A majority of current retirees, as per a 2024 Gallup poll, rely heavily on Social Security as their primary source of income. Therefore, planning and strategy creation should be started well in advance.
Before you and your partner retire, it's a good idea to discuss the types of Social Security benefits you both are eligible for, the age at which you plan to file, and the contingency plan in case of one's demise.
1. Are you or your partner eligible for spouse benefits?
Social Security retirement benefits are the most common type, and you usually qualify for them after working and paying taxes for at least 10 years. However, married retirees with minimal work histories can sometimes qualify for spouse benefits.
To qualify for spouse benefits, you must be married to someone entitled to either retirement or disability Social Security. Generally, you need to be 62 years old to file, but you can file earlier if you're caring for a child who is either under 16 or disabled.
The maximum you can receive in spouse benefits is 50% of your partner's full benefit amount or the amount they'll collect at their full retirement age. If you're also entitled to retirement benefits based on your own work history, you'll only receive the higher of the two amounts – not both.
The average spouse of a retired worker receives around $909 per month in benefits, according to November 2024 Social Security Administration data, so if you qualify for spouse benefits, it's advantageous to maximize them.
2. At what age will you initiate your claims?
The age at which you start collecting Social Security is one of the most critical retirement decisions, influencing your monthly income for the remainder of your life.
Filing before your full retirement age will permanently reduce your payments, and your checks could be reduced by up to 30% by filing as early as age 62. On the other hand, if you're collecting retirement benefits, delaying past your FRA up to age 70 will earn you a bonus of at least 24% on top of your full payments.
Arranging when you and your partner will file for Social Security can help maximize your total income. You may decide to file simultaneously, regardless of age. Alternatively, you may plan for one person to file early while the other delays. Or both of you might file at your full retirement ages as a compromise between claiming early and delaying.
Regardless of your decision, having this discussion now will make planning for your future easier. Knowing how your ages will affect your benefit amounts will help ensure you're saving appropriately.
3. How will survivor benefits impact your plans?
Although no one wants to think about a partner's potential demise, considering how to financially cope in such an unfavorable scenario can be wise.
If you're receiving spouse benefits in retirement, you'll no longer qualify for them if your partner passes away. However, you may be eligible for survivors benefits instead. Widows and widowers can receive up to 100% of their spouse's benefit amount, which can provide meaningful financial support for surviving partners.
Once again, no one necessarily wishes to create these plans, but knowing how your finances might change after a partner's death can alleviate some stress in the future.
Social Security plays a significant role in retirement for many Americans. Strategizing with your partner can help you maximize its potential. By having these discussions now, you can ensure all your bases are covered as you approach retirement.
- Understanding spouse benefits is crucial for retirement planning. If you or your partner have minimal work histories, you might be eligible for spouse benefits, which can provide you with up to 50% of your partner's full benefit amount or the amount they'll collect at their full retirement age.
- The age at which you start collecting Social Security can significantly impact your retirement income. Delaying your claims beyond your full retirement age can lead to bonus payments, while filing early can result in reduced payments. Planning your retirement with your partner, considering when to file for Social Security, can help maximize your total income.
