How to manage going from two incomes to one |

How to manage going from two incomes to one

WILLIAM CREEKBAUMSpecial to the Appeal

When one half of a working couple decides to bid adieu to the working life, it can be a major life change for both partners, with its fair share of pitfalls and unknowns. If you or your spouse is considering this step, some of these questions will inevitably arise in your discussions: Are we financially prepared? Can we maintain our lifestyle on just one income? What will we do about health insurance?

Staggered retirements can be financially complex, especially if the retiring spouse immediately must begin drawing on a nest egg. More typically, one-retirement couples have to evaluate varying Social Security benefits and pension estimates. If savings are tapped before age 60, there might be early-withdrawal penalties for 401(k) and other retirement plans.

You’ll also need to figure out how much money you’ll need every month to maintain your standard of living – or to achieve the one you envision for retirement. This process will involve analyzing your accumulated wealth, forecasting future income and crafting a budget consistent with your expense and income predictions.

Your investment strategy should also be reviewed, since goals often change in retirement. But depending on your investment time horizon and other key factors, your primary objective may still be long-term growth, meaning you should likely focus on managing risk, investing in growth-oriented stocks and holding investments for the long term. Your financial advisor can help you calculate the funds you will need to make your staggered retirement a reality – and help you adjust your investment portfolio accordingly.

Health insurance is another vital consideration for one-retirement couples, particularly when retirement occurs before Medicare eligibility begins at age 65 or before a company pension plan with health benefits kicks in. Couples must decide whether the retiring spouse is better off covered under the working spouse’s plan or through coverage offered by a previous employer. In addition, COBRA coverage – federal legislation that allows some workers and their family members to maintain health care coverage after working – lasts only 18 months in most states. If neither the working spouse’s plan nor the retiree’s previous employer offers coverage, more expensive private insurance may need to be purchased.

Besides developing a comprehensive financial plan, you and your spouse or partner also need to think about the psychological implications of retirement, as well as retirement on different schedules. Winding down gradually may help ease the transition.

Many successful retirees find meaning and purpose in life’s next chapter, whether through a second career, volunteer work, new interests or old hobbies. As with the financial side of planning for retirement, the key is to take control of the situation, rather than having the situation take control of you.

Planning for retirement should begin years before you think about ending your career. Having the right discussions with your financial advisor can lead to new strategies. The sooner you know where you stand, the more options you’ll have to help build the lifestyle you envision for retirement.

Here are five questions I think you and your spouse should answer and discuss before retiring:

How do we want to spend our time and what kind of lifestyle do we plan to live?

What will it cost to fulfill our goals and what will our budget look like?

Where will the income we need to finance our goals come from (e.g. retirement accounts, stocks and bonds, Social Security)?

How will we manage health risks – and do we have adequate health insurance and long-term care insurance?

Are our legal documents in order, with updated wills, living wills and clear instructions – if we’re incapacitated – as to who should have durable power of attorney on financial decisions and who should serve as health care proxy for medical care decisions?

• For more information on retirement strategies, please call me at 689-8704 or e-mail