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When One Spouse Retires Before the Other

As a recent retiree, Carolyn Prosak has had plenty of time to put together a to-do list for the ranch home she shares with her husband, Victor, in San Jose, Calif. Her ambitious agenda matches her energetic personality: Get the house power-washed and the trim painted. Re-landscape the backyard. “Seniorize” the bathrooms by widening the doorways. Repave the driveway and redo the guest room to make space for her many hobbies.

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Victor, who works full-time supervising the landscaping for a property-management company, has other ideas. His order of business: Replace the roof before tackling the trim and the power-wash, and hold off on major landscaping until he retires himself, some five years hence. After poring over the list together, “we’ve reached compromises and set priorities,” says Victor, 65. And because Carolyn, 66, is at home, “I can lay the groundwork,” she says. “I see that as my job.”

The Prosaks are among a growing number of couples who are taking separate paths into retirement. For some, job loss or disability has forced the decision; for others, age disparity (men are three years older than their wives, on average) has played a role. The closing gap in earning power is another factor, says Richard Johnson, director of the program on retirement policy at the Urban Institute, an independent research group. As women bring home bigger paychecks, “we’re seeing more of them staying in the labor force after their husbands retire.”

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Staggering your retirement dates has its benefits. “One is that each partner can retire at the age that works best for his or her career,” says Johnson — say, to get the full value of a pension. The one-two approach also allows the retired spouse to take stock and prepare for when both are out of the workforce. And watching one spouse make the transition to retired life can help the other spouse navigate those waters when the time comes.

Retiring separately also involves challenges, including negotiating financial and personal priorities and adapting to new roles. All that can be tricky, given that about one-third of couples disagree about how they will spend their time in retirement, according to a 2013 Fidelity study. Better to hash out issues sooner rather than later, says John Sweeney, executive vice-president of retirement and investing strategies at Fidelity. “It’s important to be aligned in how you want to achieve your goals.”

Smoothing the transition

Carolyn Prosak didn’t choose to retire. She loved her job as a health educator on a research study at the Stanford University School of Medicine. But by July 2013, “it was pretty clear that the study was going to end and that we wouldn’t get funding for another version being considered,” she says. In November, she learned that she would be laid off after the first of the year. Rather than look for another job right away, Prosak retired.

Although the decision to retire was made for her, she was lucky in several respects. Having worked at Stanford for 16 years, she was eligible for retirement benefits, and she was able to use up her vacation time before officially leaving the job. That gave her several months, from January to March, to map out her future while still bringing in a paycheck.

One issue she didn’t have to worry about: health insurance. At 65, she qualified for Medicare and took Part A, which covers inpatient care at no premium. She now has retiree health coverage, an increasingly rare benefit. Stanford subsidizes the cost of a Medicare Advantage plan through Kaiser Permanente. An HMO, the plan provides Medicare benefits and other health services. Had she not had access to retiree coverage, she could have signed up with Victor’s employer health plan, albeit for a stiff price, or picked up Medicare supplemental coverage on her own.

Carolyn used her first weeks off the job to have elective surgery. While recuperating, she took advantage of another Stanford bennie: retirement and job coaching. She enrolled in online courses to help her identify her interests and structure her free time. A registered dietitian, she hopes eventually to return to work part-time. She also took on-site classes to assess her skills, develop her LinkedIn profile and investigate new career opportunities. Like many new retirees, “I feel guilty that I’m not working. I’ve worked all my life,” she says.

Tweaking the budget

The Prosaks weren’t completely blindsided by Carolyn’s retirement. Knowing that her job was uncertain, they amped up their preparations, including contributing the max to her employer retirement account ($23,000, which included the $5,500 in catch-up contributions she was entitled to make because she was over 50). And they tailored their expenses to fit Victor’s salary. “We figured that if we couldn’t live on Victor’s income, we should know it now,” says Carolyn.

The exercise was made easier thanks to the Prosaks’ conservative approach to finances. “They are frugal and have always been savers, so in that sense they’ve been planning,” says Anne Chernish, a certified financial planner in Ithaca, N.Y., and Carolyn’s longtime friend, who has helped the couple with their finances. The Prosaks paid off their mortgage a few years ago and have no debt except for a small amount on their home equity line of credit.

Article source: http://www.kiplinger.com/article/retirement/T047-C000-S002-when-one-spouse-retires-before-the-other.html