When Just One of You Is Retiring (page 2 of 2)

Tax and Insurance Concerns

Retirees with old-fashioned defined benefit pensions will need to decide how long to extend the payouts. Married retirees automatically receive a "joint and survivor" annuity, which extends benefits through both spouses' lifetimes. But they may instead be able to opt for higher benefits that last only through the retiree's lifetime (a "straight life" annuity) if both spouses say so in writing before the payouts start. Because women tend to outlive their spouses, men who retire first generally choose joint and survivor payouts; a wife who retires first, on the other hand, may opt for payouts that only cover her.

Taxes and insurance
When one person retires, your tax rate may go down, although it could go up if you start withdrawing from tax-deferred accounts and incurring capital gains by selling off investments. What's more, if your provisional income (which includes your adjusted gross income, all of the interest from your tax-exempt investments, plus 50 percent of your Social Security benefits) exceeds a certain amount, your Social Security benefits will be partly taxed.

Additionally, if only the working spouse has taxes withheld during the year and the retired spouse has income on which nothing is withheld, you may need to pay quarterly estimated taxes.

You can probably discontinue life insurance on the retired spouse unless his or her income is essential. But hang on to the working spouse's disability insurance, if any, and consider a long-term care policy.

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• When Just One of You Is Retiring
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