43% of Couples Disagree on This Important Retirement Matter
If you're part of a couple, there are probably numerous points you and your significant other butt heads on. Maybe you're a neat freak, and your partner prefers a laid-back approach to cleaning. Maybe you believe in saving money, while your other half tends to spend more and enjoy life's luxuries. It's natural to disagree throughout your relationship, but if there's one thing you really want to sync up on, it's retirement. That's because the decisions you and your partner make together will affect your finances at a time in your life when you no longer have a full-time paycheck to count on.
Of course, couples don't always agree on retirement, and a recent Fidelity survey highlights this point. In fact, 43% of couples actively disagree on what age they plan to retire at, but that's a decision that could have huge consequences in the long run.
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Your retirement age matters
What's so important about nailing down a retirement age? It's mostly a matter of Social Security.
Your Social Security benefits themselves are calculated based on how much you earned during your working years — specifically, your top 35 years of earnings. The age at which you and your partner file for benefits, however, can cause that number to go up, go down, or stay the same.
If you file for benefits at full retirement age, or FRA, you'll get the full monthly benefit your earnings record entitles you to. File ahead of FRA, and you'll face a reduction in benefits that could affect you for the rest of your life (assuming you don't undo your application, which you're allowed to do once in your lifetime). On the other hand, if you hold off on taking benefits past FRA, you'll increase them by 8% a year up until age 70.
Your full retirement age is based on your year of birth, as follows:
Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
Since you're allowed to start taking benefits as early as age 62, you're actually looking at an eight-year window to claim Social Security. But if you and your partner don't get on the same page with regard to choosing a filing age, you could miss the chance to really maximize your benefits.
Filing for Social Security as a couple
If you're a married couple, you have a real opportunity to set yourselves up with a nice income stream from Social Security. The key, however, is to develop a joint strategy rather than have each of you go off in your own direction.
What might your strategy look like? Let's say you and your spouse are looking at an FRA of 67 and each have a work record that entitles you to benefits individually. If you decide that you want to retire early, you might have the lower earner of the two of you file for benefits ahead of FRA while the higher earner holds off on taking benefits until FRA or beyond. This way, you're getting some income from Social Security immediately, but you're also not taking a lifelong reduction on your larger benefits payout.
Of course, if you need or want more money up front, you could do the opposite — have the higher earner take benefits right away, and have the lower earner wait. Depending on how long you delay filing and how the numbers shake out, you may come to find that the lower earner catches up to the higher earner by virtue of boosting his or her benefits.
Syncing up on a retirement age is just as important for married couples in which one spouse didn't work. Even if you aren't entitled to benefits of your own, you can collect spousal benefits based on your partner's work record. In fact, if you wait until FRA to file yourself, you'll be entitled to receive up to 50% of what your spouse collects. The catch, however, is that your spouse must already be receiving benefits for you to get your money as well.
So let's assume you and your spouse are the same age and have an FRA of 67, only you have no work history of your own. You really want to retire at 67, but your spouse wants to wait until 70. This means that you'll also have to wait an extra three years to get any money from Social Security, which could, of course, derail your plans.
While it's not particularly unusual for a couple to disagree on when to retire, it's something you'll need to reconcile so it doesn't hurt you financially. You and your partner may very well decide to retire at separate points in time, and that's OK. Just make sure you consider the way that decision might affect you from a Social Security perspective.
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