The Two-Person Retirement: Planning as a Couple
Most retirement planning assumes couples will retire together, spend together, and follow the same financial path throughout retirement.
In reality, retirement rarely works that way.
One partner may retire years before the other. Health needs can change at different times. Spending priorities may evolve. One partner might eventually require aged care while the other continues living independently.
That’s why the most effective retirement plans don’t focus solely on the household. They focus on the individuals within it.
Retirement Is Rarely the Same for Both Partners
Many retirement projections treat a couple as a single financial unit. While this can simplify calculations, it often overlooks the realities of retirement.
Consider a typical couple:
– One partner retires at 60 while the other works until 67
– One enjoys an active retirement well into their 80s
– The other develops health issues much earlier
– One prioritises travel and experiences
– The other prefers staying close to home
Over a retirement that could last 25 to 30 years, it’s common for partners to experience very different financial and lifestyle needs.
Building flexibility into your retirement plan can help prepare for these changes.
How Much Does a Couple Need in Retirement?
Many people are familiar with the old “70% rule”, which suggests retirees need around 70% of their pre-retirement income to maintain their lifestyle.
While this rule is widely quoted, it doesn’t always reflect the realities of Australian retirement.
A more relevant benchmark is the ASFA Retirement Standard, which provides estimates for different retirement lifestyles.
However, retirement spending is highly personal. It depends on factors such as:
– Lifestyle expectations
– Travel plans
– Health circumstances
– Housing costs
– Family support
– Aged care needs
For this reason, retirement benchmarks should be viewed as a guide rather than a target.
The most useful retirement plan is one built around your actual lifestyle and future goals.
The Three Stages of Retirement Spending
Many retirement experts describe retirement spending in three phases.
The Go-Go Years
The early years of retirement are often the most active.
Many retirees spend more on:
– Travel
– Dining and entertainment
– Hobbies
– Renovations and home improvements
– Helping children and grandchildren
For some couples, these years can be more expensive than expected.
The Slow-Go Years
As people age, activity levels often decrease.
Travel may become less frequent and discretionary spending may reduce.
Many couples find their overall spending slows during this period.
The No-Go Years
Later retirement often brings increased healthcare and support costs.
Common expenses include:
– Medical treatments
– In-home care
– Mobility aids
– Home modifications
– Residential aged care
While spending may decline in some areas, healthcare and care-related costs can rise significantly.
Why Couples Don’t Follow a Predictable Pattern
While the three-stage model is useful, real life is rarely that simple.
Many couples experience retirement differently because their circumstances change at different times.
For example:
– One partner may still be travelling while the other has mobility issues
– One partner may need care years before the other
– One partner may live significantly longer than the other
Rather than following a smooth retirement journey together, couples often move through different stages at different times.
This is why flexibility is such an important part of retirement planning.
Five Financial Challenges Many Couples Face
1. Different Retirement Dates
It is increasingly common for couples to retire at different times.
This can affect:
– Household cash flow
– Superannuation strategies
– Tax planning
– Centrelink entitlements
A phased retirement may create opportunities, but it also requires careful planning.
2. Different Spending Priorities
Retirement gives people more freedom to pursue personal interests.
Over time, spending priorities can diverge.
One partner may want to travel extensively, while the other focuses on hobbies, family, or community activities.
Discussing financial goals openly can help avoid future disagreements.
3. Different Health Journeys
Health often becomes one of the biggest variables in retirement.
One partner may require additional support years before the other.
This can lead to increased spending on:
– Medical care
– Home modifications
– Support services
– Respite care
It can also affect the lifestyle and financial independence of the healthier partner.
4. Unequal Super Balances
Many couples retire with significantly different superannuation balances.
These differences can affect:
– Retirement income strategies
– Estate planning outcomes
– Tax considerations
– Future wealth transfers
Looking at both balances together can help improve overall retirement outcomes.
5. Financial Decision-Making
In many households, one person manages most of the financial decisions.
While this arrangement may work well, it can become challenging if that person becomes ill or passes away.
Both partners should understand:
– Household finances
– Superannuation arrangements
– Investment structures
– Estate planning documents
Shared knowledge can help reduce stress during difficult periods.
Retirement Expenses Couples Often Forget
Many retirement budgets focus on regular living expenses but overlook larger, irregular costs.
Vehicle Replacement
Most retirees will replace their car at least once during retirement and often more than once.
Planning ahead for these costs can prevent unexpected financial pressure.
Home Improvements
Even after a mortgage is paid off, home ownership remains expensive.
Common costs include:
– Roof repairs
– Hot water systems
– Painting and maintenance
– Accessibility modifications
These expenses often increase as homeowners age.
Health and Wellbeing Costs
Expenses such as:
– Dental treatment
– Hearing aids
– Glasses
– Specialist healthcare
These can add up over time and are often underestimated.
Supporting Family
Many retirees provide financial assistance to children, grandchildren, or other family members.
Without a clear plan, these costs can place unexpected strain on retirement savings.
When One Partner Needs Aged Care
One of the biggest changes many couples face occurs when one partner requires significant care while the other remains at home.
This transition can create new financial considerations, including:
– Residential aged care costs
– Additional living expenses
– Travel and visiting costs
– Ongoing home maintenance for the partner at home
It can also create emotional and lifestyle challenges that extend beyond the financial impact.
Planning ahead for this possibility can make the transition easier if it occurs.
Preparing for Life After the Loss of a Partner
Many retirement plans focus on life as a couple. However, it’s important to consider how finances would work if one partner passed away first.
When this happens:
– Household income often decreases
– Many fixed costs remain unchanged
– Tax arrangements may change
– Financial responsibilities may shift entirely to the surviving partner
A strong retirement strategy considers both the joint retirement years and the possibility that one person may eventually manage finances alone.
Key Questions to Discuss With Your Adviser
When reviewing your retirement plan, consider asking:
– Would both partners feel confident managing finances independently?
– How would the plan work if one partner retires earlier?
– What happens if one partner requires care before the other?
– Have major future expenses been factored into the plan?
– Are estate planning documents up to date?
– Does the retirement strategy remain suitable if circumstances change unexpectedly?
Final Thoughts
Successful retirement planning isn’t just about calculating how much money you’ll need. It’s about preparing for the realities of life as a couple.
Partners often retire at different times, experience different health challenges, and have different goals throughout retirement. The strongest retirement plans recognise those differences and build in enough flexibility to adapt over time.
By planning for both partners as individuals, rather than treating retirement as a single household journey, couples can create a more resilient strategy for whatever the future may bring.
Planning Your Retirement Together
Every couple’s retirement journey is different. Understanding how your income, superannuation, estate planning and future care needs work together can help you make more informed decisions.
Book a retirement planning consultation to discuss whether your current strategy is designed to support both partners through every stage of retirement.
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