The Most Important Financial Decisions for Retiring Couples to Make

These are the most important financial planning decisions for retiring couples to make—together—before pulling the plug on their careers.

If you're a recently retired couple, or plan on retiring soon, you're preparing to enter a new phase of life that's sure to be exciting—but also includes a degree of uncertainty. And some of the decisions you make now will play a key role in determining your quality of life in the years to come.

"It's important for those nearing and planning for retirement to consider what kind of retirement they want," says Osmar Garcia, Northwestern Mutual financial advisor and co-founder and CEO of Garcia Wealth Management in Conway, Ark. "Do you want to travel often? Be close to family? Sit on a beach? Retire by age 65?" he asks. And then there are other decisions that affect your health care, long-term care, and more.

These are the most important financial decisions for retiring couples to make—together—before pulling the plug on their careers.

01 of 06

When to apply for social security

Just because you're retiring doesn't mean you have to immediately apply for Social Security. In fact, timing is crucial in determining how much you'll receive. And according to Seta Keshishian, a financial planner at JSF Financial, in Los Angeles, Calif., there are several "claiming strategies" to use.

"If you opt to take retirement benefits early at 62, the monthly benefit is reduced to 71.5 percent of the full retirement amount," Keshishian says. "Conversely, just as your benefits are reduced by taking them early, it will increase by about 8 percent annually if you delay taking them." She advises most clients to wait until the age of 70 to initiate benefits. To help illustrate this, she provides the following scenarios. "If your monthly benefit at full retirement age is $2,700 ($32,400/year), taken early at 62 it would be reduced to $1,800 ($21,600/year)," Keshishian says. "Conversely, by waiting until 70, your monthly benefit would be $3,400 ($40,800/year)."

Over the course of a year, and especially over a lifetime, this amount can make a significant difference in your financial situation. "Given that, as a population, our longevity is increasing and many are looking at a 30-plus year retirement, carefully review your choices when it is time for Social Security."

Alyssa Jennings, an Overland Park, Kan.-based financial advisor at Edward Jones, says there are other factors in addition to age that married couples need to consider. "For example, it may be beneficial for lower-earning spouses to claim spousal Social Security benefits, rather than taking their personal benefits," she says. "Here, too, the lower-earning spouse will receive bigger monthly payments by waiting until full retirement age before filing for benefits."

Another consideration for married couples is the survivor benefit. "The higher wage earner (with the higher Social Security benefit) may want to delay taking Social Security until the full retirement age (or even up to age 70) to maximize the survivor benefit if they expect their spouse could live longer than them," Jennings explains.

02 of 06

If you plan to work after retirement

Earned income can also affect social security, and many retirees still want to work part-time—or even become business owners.

"However, if they are younger than their full retirement age, and their earning exceeds a certain amount, their Social Security benefits will be reduced," Jennings says. "That said, when the individual reaches full retirement age, the individual's benefit will be adjusted to account for the amounts withheld due to earlier earnings."

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How to put a comprehensive plan in place

A 401(k) and/or Social Security can be a strong asset in a retirement plan, but Garcia warns that they shouldn't be the only part of your overall plan to generate income in retirement. "Having only one vehicle can put you at a disadvantage when it comes to efficiently generating income from your savings," he says.

"A more comprehensive plan might include some type of guaranteed income (i.e., a pension, annuities), tax-deferred retirement accounts like an IRA and post-tax savings vehicles like Roth accounts," Garcia explains. He also recommends considering whole life insurance. "It can build cash value that's not affected by the markets, and provide a lifetime death benefit that protects your family during your working years." In addition, Garcia says non-qualified investments are something else to consider since they can provide flexibility to assess your money before retirement.

04 of 06

Estate planning

You probably have some estate planning documents, such as wills, power of attorney docs, and health directives. However, Eido M. Walny, JD, founder of Milwaukee-based Walny Legal Group recommends reviewing those documents to see if you need to make revisions based on the following:

  • Has your tax situation changed?
  • Has the law changed in a way that impacts you?
  • Are you still in contact with the people you've named in your document—and are they all still alive?
  • Have beneficiary designations been updated?

"Retirement is a good time to check all of that, and if you don't have your documents together, retirement is a perfect time to get that checked off the bucket list," Walny says.

RELATED: Everything You Need to Know About Estate Planning—and Why You Should Start Now

05 of 06

Health care and long-term care

If both of you are in good health, that's great—but this may not always be the case, especially as you age. "On average, for 20 years after retirement—meaning approximate ages 65 to 85—health care costs are typically in the range of $250,000 per couple," says Sheraz Iftikhar, CEO and founder of Arch Global Advisors in New York, NY. "A quarter of a million dollars is a large amount, and is something that everyone should prepare for, no matter what." He recommends thinking about these costs early so you can put aside money.

Something else retired couples may not want to think about: a nursing home. Again, this is one of the statistics related to people living longer, and according to Walny, the probability that one of you will end up in a nursing home is pretty high.

"Nursing homes are expensive and can run $5,000-$10,000 per month, so some thought should be given to whether that sort of care is a concern and how it should be dealt with," he says. Straight-up saving money is one option, and if you don't wait too long, getting long-term care insurance may still be viable.

"Otherwise, some specific Title XIX planning might be an option; in any case, this is an important conversation that many people put off for too long and, in doing so, options will be forced on them," Walny says.

06 of 06

Where to live

There's a tendency for retired couples to remain in the house where they raised their kids. There are so many memories there, and it is a place for everyone to come home to during the holidays. However, Ellen I. Sykes, a broker for Coldwell Banker Warburg Realty, says retirees should consider a different perspective.

"Generally, the moment you retire, you are paying for what you don't need, whether it is property taxes based on a big house, monthly HOA fees, or maintenance," she says. She recommends downsizing to cut your costs—and save/invest that extra money. "You could also choose to rent and put all of the money in the bank."

If you move out, Sykes recommends finding a one-story residence. If the home has steps, make sure the primary bedroom is on the first floor. "Find something that is wheelchair-friendly and also think of a separate bedroom and bath for a caretaker, so you have the option of staying home in the case of an illness or accident."

And if you want a mortgage, she recommends getting one that you can pay off relatively quickly. "If you have a lot of income in the first part of retirement, use that to become debt-free, since studies show that the most common cause of anxiety for seniors or retirees is running out of money."

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