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The Money Issues You'll Face
Every business day, Linda Doughty goes to her job directing a staffing agency for a large healthcare corporation. While she works 10 and 12 hours at a stretch, her husband, Dan, who retired in early 2000, spends his time taking care of their house in Deerfield Beach, FL, supervising construction of the vacation home the two are building in the North Carolina mountains and restoring a 30-year-old Italian sports car.Married 21 years, the Doughtys always thought they'd retire together. But some unforeseen opportunities caused them to change their plans. Dan, 53, a former police major with 30 years on the force, was part of a group that was offered an attractive early retirement package. Meanwhile, Linda, 51, watched the tiny business she helped found blossom into a 16-office enterprise -- and her salary grow along with it. Instead of retiring with Dan, she decided to work a few more years and save for an even more comfortable retirement. "I enjoy what I'm doing," Linda says. "And I feel to retire now just for the sake of retiring and then not be able to do anything would not be our style."
If you and your spouse think you may retire on different schedules, here are some of the money issues you'll need to work out.
Managing Your Income
The Doughtys are preparing for the day when both of them will be retired by living on Linda's income and banking Dan's pension checks, a strategy many financial advisers recommend. Experts also suggest minimizing the amount you take from tax-deferred accounts until both of you are retired. Otherwise, you'll pay higher income taxes on the withdrawals and risk depleting your retirement savings too soon. "As a rule of thumb, try to take money first out of the accounts you'll pay a smaller amount of tax on," says Deborah Voso, a certified financial planner in Frederick, MD.
To gain a wider variety of investment choices, the spouse who retires first can roll over his 401(k) into an IRA. But retirees who are under 59 1/2 may want to keep their money in the 401(k) for a while, since the rules governing withdrawals from such plans are often more flexible than those for IRAs.
As for Social Security, while it becomes available at 62, you'll get bigger checks if you don't start drawing benefits until at least the normal retirement age of 65 (or older, if you were born after 1937). In addition, if you are under age 65 and continue to work while receiving Social Security, you may lose some of your benefits because of the so-called retirement earnings test.
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