4 things to consider if you retire ahead of your spouse

The decision to retire is a big one, and there are various factors that are apt to play into it. But what happens if you're ready to pull the trigger, and your spouse isn't? While there's no rule stating that you and your spouse must leave the workforce simultaneously, you'll need to consider the ramifications (both good and bad) of retiring at separate points in time. Here are some key points to keep in mind.

1. You might need to adjust your budget

Just as you'll need to rethink your budget once you and your spouse are fully retired, so too must you reexamine your finances if one of you decides to stop working. Losing a salary will most likely impact the amount you can afford to spend, so take a close look at your expenses and make sure you can keep up on a single salary, or one salary plus Social Security. If not, make adjustments early on, because the last thing you want to do is rack up debt later in life.

2. It might make sense for you to file for Social Security right away

Retiring at a separate time from your spouse gives you a real chance to be strategic about how you claim Social Security. Assuming you're at least 62 when you retire first, you have the option to start taking benefits immediately to generate some income while leaving your spouse's benefits to grow. This can be a smart choice if you're the lower-earning spouse. Of course, you will need to keep in mind that if you claim benefits before reaching full retirement age, which, depending on your year of birth, is 66, 67, or somewhere in between, you'll lose a portion of the full benefit amount you otherwise would've been entitled to. Still, it's a good way to compensate for your loss of income without having to make too many lifestyle sacrifices. 

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Figure out your stable retirement income.

Take stock of any pension or Social Security income you expect to get during retirement. This stable income should form the basis of your budget, but probably won’t cover all of your expenses. This is your base retirement income that your savings and investments build upon.

Look at your other retirement income sources.

Determine what you can expect to draw down from your personal retirement investments. You may want to meet with an investment advisor to develop a withdrawal strategy. If you want or need to continue working in retirement, you can also include any part-time income you expect to receive for the first few years of retirement.

Make your retirement budget.

Figure out how much you plan to spend during retirement. This can help you get a handle on whether or not you actually have enough money to retire in the coming year.

One good exercise is to figure out the absolute minimum you need to get by. This means paying essential bills including health care expenses, clothing, food, transportation and other essentials. Then, determine your ideal retirement budget. If you could have the retirement you really want, how much money would that take? This lets you add in things like dining out, traveling and other luxuries.

At a minimum you should be able to cover your bare bones budget indefinitely. But it’s better to delay retirement until you can afford the lifestyle you want. Working an extra year or two might help you to finance a more enjoyable retirement.

Check into your investments.

As you approach retirement, it’s a smart time to double check your portfolio allocation. You should be shifting your money into lower risk, lower reward investment options, such as bonds. You can still take some risks, if you can stomach potential declines in your investment portfolio. Just be cognizant of how a downturn in the market could affect your retirement plans.

Figure out your health insurance.

If you are 65 or older you may qualify for Medicare, but you should also look at supplemental insurance policies you might need. If you don’t yet qualify for Medicare because you’re retiring early, be doubly sure you have enough cash flow to cover an individual health insurance policy.

Use your paid time off.

Check into your bank of vacation time or paid time off. You should definitely use this before you retire, unless you can translate those banked days into cash at the end of your working years. If you plan to look for a new place to live in retirement, that’s an especially good use of any banked time off you have available.

Make a plan for your time.

Figure out what you plan to do with your time during retirement. The transition from working every day to a life of leisure can be surprisingly emotional. The best way to fend off boredom and depression is to stay active physically, mentally and socially.

Take some time now to plan a retirement celebration, vacation or to find some volunteer opportunities you can step into as a retiree. This will help smooth the transition into your golden years.

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3. You'll need to figure out your health insurance

Retiring ahead of your spouse may not hurt you from a health insurance perspective, because even if you're not yet eligible for Medicare, you may have the option to get on his or her employer's plan, thus saving yourself the cost of covering that expense in full. Even if you are eligible for Medicare (which happens once you turn 65), if your spouse's health plan premium is reasonable, it might make sense to keep paying it for better coverage. And as long as you're covered under that plan, you won't be penalized for not signing up for Medicare right away.

4. You might get lonely or bored

Maybe you have a number of friends or neighbors who are already retired, and you're eager to experience that leisurely lifestyle together. But if that's not the case, and you retire ahead of your spouse, you run the risk of getting bored and lonely early on. And that, in turn, could negatively impact your health. It's said that retirement increases the likelihood of suffering from clinical depression by 40%, and if you're going at it solo, you might further raise this risk. Therefore, if you're going to be the first one to leave the workforce, have a plan for what you'll do with your free time. You might take classes, volunteer, or even start your own business. Just make sure you have something fulfilling to look forward to.

There are plenty of good reasons to retire years before your spouse does the same. Maybe your health is starting to fail, and you're tired of struggling to keep up with your job's demands. Or maybe the opposite is true -- your health is great, and you want to enjoy retirement while you have the energy to do so. If you're ready to retire and your spouse isn't, by all means, go for it. Just be sure to consider the ramifications before taking the leap.

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