Should You and Your Partner Retire at the Same Time?

By David O’Brien

It’s one of those curious questions people rarely ponder before the time draws uncomfortably near: will we retire together? On the one hand, it makes sense to seize the opportunity to travel and experience this next chapter of your lives together. On the other, how can two people possibly be ready to leave the workforce at exactly the same time?

There’s more to factor into the equation than the pros and cons of only having to make lunch for one, though, and that includes possible financial losses as well as cash flow and optimal timing. Whilst a synchronized retirement might sound ideal, you’ll need to weigh up whether the sacrifices are worth it before you start planning your concurrent work farewell parties. If you’re suddenly enjoying a new project at work, is it really time to go?

Super you vs super us

“It’s important that any strategy you put in place targets your retirement goals as a couple, but your strategy will also need to conform to certain rules and requirements, based on your individual circumstances,” says Keiran McIlwain, Head of Advice and Professionalism at MLC. For instance, the super rules apply at an individual level, meaning the contribution limits are on a per-person basis as opposed to a per-couple basis, and the restrictions that apply to accessing your super are also based on your personal circumstances.

“As you approach retirement, it isn’t uncommon to think about selling down other investments such as shares or an investment property. Some of these events could also trigger capital gains tax. Also, unfortunate realities at this time of life might also mean that you receive an inheritance. If you want to invest some of these surplus funds in super, considering all the available options as a couple will help to ensure that you maximize contributions by making use of each of your contribution caps,” he says.

The perks of retiring together

For many, retirement means the opportunity to finally start ticking off some of those bucket list locations. No more amassing holiday leave or taking a personal day—you’re free of the confines of a job forever. Aside from the obvious travel perks, retirement also gives you more time to spend with your family and grandkids. Though one thing’s for sure—you’ll definitely notice how quiet and relaxing the house is when they aren’t around.

However you decide to spend your time, it’s important that you get the most out of this new chapter together, and the best way to ensure this is to plan ahead. “For most of us, the main thing standing between us and retirement is cash flow—ensuring we’ll be able to generate enough income to cover ongoing living expenses, and certain unplanned expenses, for the duration of our retirement. Whether or not this is an achievable goal will come down to early and thorough planning,” McIlwain says.

The cons of not going it alone

The obvious hurdle you’ll need to overcome if you and your partner retire together is lack of cash flow. “The thought of annual overseas holidays, your grandchild’s destination wedding in Greece, and regular golfing trips surely sounds appealing. But without any ongoing employment income to fund these expenses, and no further employer contributions into your super account, can you afford to retire together?” asks McIlwain. If it turns out that you can’t, you’d be in a much better position to realise that whilst still employed, rather than trying to re-enter the workforce after an extended hiatus.

If the plan is to rely on full or partial Age Pension to cover your expenses, it’s absolutely crucial to plan carefully. McIlwain says that is especially important if you and your partner aren’t the same age. “Then it may be the case that only one of you will be entitled to the Age Pension for a period of time. This might mean that you need to draw down greater amounts from your superannuation savings—which might be okay if you know that your savings can still go the distance. Again, this is where the benefits of financial advice come into play,” he says.

Lessons learnt

NSW couple Pat and Michael retired together three years ago. “The first thing we did was take a trip to Europe together, which was something we’d wanted to do for twenty years”, Pat says. “Then we caught the travel bug a bit and made a trip to The Margaret River, as well as visiting family in Geelong and Lorne not long after. We quite liked our new leisurely lifestyle, but we didn’t like what it did to our bank account.” In retrospect, Michael says that they should have spent more time with a financial adviser to better understand the ways they could have boosted their retirement savings whilst maximizing their Age Pension entitlements.

According to McIlwain, “If you haven’t both reached Age Pension age, simply considering whose super account you should contribute additional savings into can make a big difference to the elder spouse’s Age Pension entitlement. It is worth getting advice to understand what is right for you and how to maximise your retirement income.” Though Pat says she wouldn’t change the time they’ve shared together over the past few years for anything, if they could do it all over, they’d work with a financial adviser to help them plan ahead and best achieve their joint retirement goals.

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