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How to Manage Your Finances When One Spouse Retires -- and the Other Doesn't

Geoff Williams

If you're married, and you're going to be retiring soon, you may have noticed something. Even if you and your spouse agree on everything, there's probably one major difference between the two of you. You probably have different end dates for retirement. After all, you may not be the same age. Or perhaps you love your job and are going to stick around as long as possible while your spouse is counting down the years, months, weeks, days and hours to retirement.

How you handle one spouse retiring while the other stays on the job is a pretty straightforward affair, and yet, if you don't plan for it, trouble can arise.

A lot of couples don't plan for this period of their lives, according to Dan Keady, a certified financial planner and senior director at TIAA, a financial services company headquartered in New York City.

"I think what happens over time, especially with longtime couples, they envision that their spouse knows what they're thinking because of the offhand remarks that they've made from time to time," Keady says.

[See: 10 Painless Ways to Save More for Retirement.]

While you should be saving for your retirement for decades, realistically and ideally you, your spouse and your financial advisor (if you have one) should start discussing life after retirement five years before one or both of you retire, Keady says.

"Where a lot of people go wrong is that one spouse will walk into the house, throw everything on the table and say, 'I'm going to retire next month.' That doesn't give you enough time to plan," he says.

What can go wrong? Plenty, according to Robert Laura, a retirement coach and planner in Brighton, Michigan.

"Weird things come up in these situations," he says.

Problems often come in the confusion over the role you and your partner are now playing in your household.

"Couples can suffer from not knowing who should be cooking dinner, cleaning the house, mowing the lawn or making weekend plans," Laura says. "If, let's say an older husband retires first, does he cook and clean during the week, then return to yard duties on the weekend as she cooks and cleans? Situations like this can cause frustration and be fertile ground for arguments."

And money often becomes an issue, Laura adds, tossing out a couple of questions couples sometimes wrestle with: "Is the one at home less involved in financial decisions now because they are on a fixed income? Are they working to basically pay for health care because one spouse isn't 65 yet?"

But plenty can go right, too, retirement experts say, because by not shutting off the spigot on two income streams simultaneously, you have a chance to ease into retirement life by living off one person's paycheck instead of going straight to your savings.

[See: 11 Ways to Save Time and Money.]

Several strategies to try. Let's get the obvious financial maneuver out of the way. If you or your spouse retires in your 60s, ideally, you won't collect your Social Security benefits yet -- you'll wait until you're 70. That's when you can get the most money.

"After age 62, you can receive up to 8 percent more in future monthly payments for every year you postpone taking Social Security up to age 70 [depending on your full retirement age]. Holding off on that claim is one of the best things to do to boost income in retirement," says Shane Eighme, a financial advisor in Dublin, Ohio.

And even though one half of your household is retired, and you're both living on one income, try to keep contributing to your retirement accounts, Eighme urges.

"The spouse who continues to work should continue contributing to a retirement savings account," Eighme says. "If his or her employer offers a 401(k) match, continue taking advantage of that free money and stay in the mindset of saving. The benefit of staggering your retirement is that both people are not tapping into the retirement savings at the same time."

Meanwhile, the person who is still working may be able to contribute money to the nonworking spouse's IRA, says Maggie Johndrow, an associate financial advisor with Farmington River Financial Group in Farmington, Connecticut.

"To make a spousal IRA contribution, the couple must be married, file a joint income tax return and must have earned income of at least the amount you add to your IRAs," she says. "Roth IRAs have no age restrictions for contributions, while the nonworking spouse must be under 70 and a half years old in order for the working spouse to make a spousal contribution into a traditional IRA."

Johndrow adds that the contribution may or may not be tax deductible. "If the working spouse contributes to an employer-sponsored qualified retirement plan, the ability to receive the tax deduction of the spousal contribution is phased out depending on his or her adjusted gross income."

[See: 10 Images That Will Motivate You to Save for Retirement.]

The real danger zone. While everything should go smoothly, especially if you plan ahead on your retirements, a lot of couples get in trouble because not only does an income end, one half of the couple often spends more money than they used to.

"The retirement mentality might kick in. That person may want to take long trips or explore hobbies," Eighme says.

And long trips and hobbies, of course, can cost a lot of money.

Keady says that he has seen couples run into trouble for similar reasons. Not that you should be expected to sit on the sofa and watch TV all day, or spend your retirement cleaning your home from the moment your spouse leaves to the moment your spouse returns home. You should start enjoying your retirement and having a life.

But try to find inexpensive recreational activities. Don't go overboard, Keady warns.

"Free time is not free," he says. "It can be expensive."

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