Different Dates? - Tips for couples planning separate retirement dates
When a married couple plans to retire on different dates, they may need more than a calendar to manage the situation. They can spend decades investing for their retirement, but when it comes time for them to decide on a date, will there be one red circle on the calendar or two?
Whether due to age discrepancy, or the fact that one spouse won't leave a thriving career, couples often have to negotiate a retirement date for each one.
Key Issues
If your potential retirement date differs from your spouse's, you have three key issues to consider in planning your getaway:
- Projecting your respective pensions.
- Deciding when to start drawing down certain retirement assets, such as your RRSPs,
- Choosing the best way to take the payments.
One of the most important questions is whether to take the joint-and-survivor benefit on the first retiree's pension. Unless signed away, pension plans automatically include rights to survivor benefits. Your payments will be reduced permanently by about 10 to 12 per cent, but your spouse will continue to receive monthly cheques, normally equal to about half the benefit.
Sometimes, however, it makes sense to sign away your survivor benefits. For example, if both spouses qualify for good pensions, they may be better off choosing the higher payments generated by waiving the benefit.
You should also examine the amount of life insurance and other assets available to your spouse. If they are enough to fund his or her retirement years, there is less need for the survivor benefit.
When to start CPP
Couples also face decisions about when to start drawing their CPP. If either spouse opts for CPP at age 60, the benefits will also be smaller than age at 65, but more cheques will be generated over a lifetime.
On the other hand, the spouse retiring first may choose to delay taking CPP while the other spouse continues to work. Fewer cheques will be received, but the amount of each cheque will be larger.
You can calculate how different retirement dates or changes in your income will affect your CPP by using the retirement-planner calculator on the Government of Canada's Web site: http://www.sdc.gc.ca/en/isp/common/cricinfo.shtml
Deciding on a Date
Wavering on retirement dates can make planning tricky. For example, if the wife is five years younger, she will likely work to age 60 as well. However, if both spouses want to retire at the same time, more money will be needed to fund the longer retirement. Couples need to talk frankly about how to deal with the possibility that one of them will remain in the working world while the other will be unconstrained.
If you need help calculating your income needs at retirement or developing a plan for retiring on separate dates, we will be happy to assist.
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