How to Plan When One Spouse Retires While the Other Keeps Working

When one spouse retires and the other continues to work, “It’s important to pay attention to the psychological component,” Douglas Boneparth, founder and president of Bone Fide Wealth, tells ThinkAdvisor in an interview.

“There could be everything from jealously and animosity to uncertainty all the way to everyone is happy doing their own thing,” the financial advisor explains.

Boneparth, 37, has seen it all as a certified financial planner for 12 years, 10 of them as an independent financial advisor.

The one-spouse-retires/one-works arrangement allows greater distribution flexibility because of the income generated by the working spouse, he notes.

From his office in downtown Manhattan, Boneparth specializes in helping millennials and has $90 million in client assets under management.

There are several pluses to half a married pair continuing to work — among them, less reliance on retirement assets.

Also, it reduces income tax, and there’s a possibility that the working spouse’s group health care plan may be superior to and more affordable than Medicare coverage, Boneparth points out.

Further, if you’ve stopped working, there’s likely no longer the need to maintain individual disability and life insurance polices, so those premium payments will be eliminated.

Still, several other big decisions need to be made, like when each spouse should start receiving Social Security benefits and when to begin spending from a retirement account.

In the interview, Boneparth highlights the necessity of a comprehensive financial plan spanning a wide range of contingencies and options.

He has been helping people since his college days, when he worked part time at his father’s Ameriprise Financial practice in Florida.

At 23, he relocated to New York to join another Ameriprise advisor’s business and began building his own book on the side.

He went independent in 2012, first with a partner, then going solo four years later. Two years before, he received an MBA in finance and management from NYU’s Stern School of Business.

ThinkAdvisor recently interviewed Boneparth, who was on the phone from his office at 7 World Trade Center.

The advisor, whose undergrad degree is a B.S. in public relations from the University of Florida, announces that he has “just rebranded retirement.”

“The classic definition, ‘I’m not going to work anymore,’ is a little antiquated,” he says.

In the interview, he reveals what he believes is a more up-to-date characterization.

Here are highlights of our conversation:

THINKADVISOR: What should clients be sure not to overlook when one spouse retires and the other continues to work?

DOUGLAS BONEPARTH: It’s important to pay attention to the psychological component. 

There could be everything from jealousy and animosity to uncertainty all the way to everyone is happy doing their own thing. I’ve seen it all.

What actually is “retirement” nowadays?

I just rebranded “retirement” to “financial independence.” The classic definition, “I’m not going to work anymore,” is a little antiquated.

A better definition: Retirement is when not working is optional and affordable. You’re not reliant on [earning] income in order to live comfortably.

When one spouse in a couple plans on retiring and the other wants to continue working, for whatever reason, would that change their retirement plan?

Not necessarily. You have an advantage when one spouse keeps working: an income stream coming in, which obviously allows for a little more flexibility. 

The reliance on retirement assets is less than if both were retired with no earned income being generated.

So this [strategy] actually favors planning. It provides more flexibility in what it takes to re-create the level of income needed to live a similar lifestyle during retirement years.

What are some issues that particularly need to be addressed in the retirement plan?

The best time to take Social Security; the best time to begin drawing down assets from a retirement account. 

And how one spouse’s ability to continue earning money may provide less of a burden on the need to draw down those assets.

What about health care insurance?

There’s a lot to think about. The ability to stay on the working spouse’s group benefits comes into play versus enrolling in Medicare.

In some cases, you might get better health insurance through the working spouse by continuing to be on group health care than through Medicare.

This will come down to a cost-benefit analysis. If the premiums are cheaper and the benefits more robust staying on the spouse’s plan, then you would choose that versus Medicare.

Should the retired spouse start taking Social Security benefits while the working spouse waits to do so?

Here’s my rule of thumb: If you need Social Security to live on, then, obviously, take it starting at full retirement age. 

Otherwise, it’s likely worth waiting till age 70 to claim — and get a bigger benefit — assuming you think you’re going to live well into your 80s.

Does income tax decrease when one of the spouses retires?