Estate Talk with Yens Pedersen

You’ve got Q’s, I’ve got A’s! In this week’s episode, I’m answering all your burning questions, including how to…

✅ Balance Finances: Managing cash flow when one partner retires before the other is crucial. Evaluate retirement income sources, minimize taxes, and consider health insurance impact.

✅ Make Smart Investments: Adjust your investment portfolio for retirement income. Align it with your timeline, manage risk, and plan income needs to avoid selling during market downturns.

✅ Jumpstart Emotional Communication: The financial journey sparks deeper emotional conversations. Beyond money, discussing ideal retirement days fosters understanding and connection. A holistic approach combines financial strategies, investment planning, and emotional exploration.

👉 Dive into our podcast—uncover financial wisdom and spark meaningful retirement conversations. Tune in to “Episode 102: Ask Me Anything” now! 🎙️

Show Notes:

Hey there, and welcome back to Episode 102. Today is a little different because I want to share a question I received from a listener, and I’m going to answer it because it’s quite a common one. This situation arises frequently in our office, and it’s something that everyone worries about. After all, we’re all human.

Let me read out the question: “I’ve been contemplating retiring before my spouse, and I’m somewhat concerned about how that might impact our financial situation. Additionally, I’m unsure about dealing with the potential emotions that arise when one person retires while the other continues working. How can I navigate the emotional aspect of retiring at different times? I worry about how this decision might affect our relationship and day-to-day life.”

Alright, let’s delve into the emotional aspects a bit more. I always advise addressing questions like these with more questions. In our office, we often encounter couples who retire at different times. This trend seems to be on the rise, and while I can only speak based on the people I interact with in our little world, it’s increasingly common for various reasons. Sometimes, it’s about escaping a job that negatively impacts mental health, leading one person to want out while the other is content to continue working for financial reasons or other motivations.

Regardless of the reasons, this scenario can be challenging to navigate. It becomes even trickier if you’re trying to align your retirement with pension benefits to make the most of them. So, let’s unpack the emotional aspect a bit further. First of all, thank you for posing this question. Rest assured, you’re not alone in your concerns. The dynamics of your relationship and daily routines are bound to shift.

My foremost advice is that open and honest communication is absolutely crucial. Sit down with your spouse for a heartfelt conversation about your motivations for retiring at different times. Don’t keep your reasons hidden—bring them into the light. Even if it’s as simple as hating your current job, let your spouse know. These are the things they’ll want to understand. Share your thoughts, worries, and dreams openly. Perhaps there’s a lifelong aspiration or a hobby you’ve been longing to turn into a source of income. Maybe you’ve got a side gig or a freelance project. Whatever it is, discuss it. Furthermore, encourage your spouse to do the same. It’s vital to understand each other’s perspectives.

Expect emotions like uncertainty to emerge—questions about financial stability might arise. One partner might feel a tinge of envy, which can be harder to address. This jealousy could stem from thoughts like “It must be nice not to have to work anymore,” which might even crop up well before the actual retirement. A sense of loss might be present too, as a significant change in routine and identity is on the horizon. The story of your lives together is undergoing a transformation, and that can be challenging.

The key is to express these emotions. Acknowledge them, validate each other’s experiences, and permit yourselves to feel and discuss it all. If needed, consider seeking support from a third party, like a counselor, therapist, or even a financial planner. While we’re not counselors, we can facilitate a dialogue that needs to happen. The crucial thing is to communicate and set healthy boundaries and expectations beforehand, especially regarding schedules and activities.

Discuss how you envision spending your time. Find ways to create meaningful shared experiences. Make plans and schedule activities to do together. Oddly enough, this could result in more quality time, as the retiree might have a more flexible schedule. Collaborating on these activities can help build a strong connection.

Furthermore, consider exploring the financial and lifestyle benefits of your decision. Your early retirement might grant you the time to handle household responsibilities, support your partner’s career, or care for family members. Framing your retirement in terms of its contribution to overall family well-being can help both of you find peace with the situation—one working while the other isn’t.

Remember, the working partner might reassess their position after the first retirement. Excitement about spending more time together could prompt the working spouse to revisit their retirement plans. This leads me to the financial aspect, as you inquired about both financial and emotional aspects. Regarding the financial aspect of retiring at different times, I can offer a few tips. However, my primary advice is to seek expert guidance from a certified financial planner who can tailor advice to your specific situation.

But here are some takeaways for the financial aspect. One of the main concerns here is likely managing cash flow during the period when one of you is still working while the other one is retired. You’ll want to assess your potential retirement income sources, such as pensions, CPP, OAS (Canada Pension Plan/Old Age Security) investment withdrawals. Additionally, consider the health insurance component. Your partner who is still working probably has employer-sponsored health coverage, which will also play a role.

It’s also important to evaluate the impact of retiring on your tax situation. Taxes are at the core of all our financial decisions. The goal is to avoid overpaying and keep as much money as possible in your pocket. Depending on your income sources, tax brackets, potential deductions, and other factors, things might change. Planning and awareness are key.

Another crucial aspect in terms of finances is your investment portfolio. You’ll likely be relying on your investments for income, either now or in the future, especially if you’re no longer working. It’s essential to review and adjust your investment allocations to align with your new retirement timeline and risk tolerance. Sometimes, this means reducing risk and minimizing volatility. Plan how much income you’ll need each year from your investments, and create a strategy to prevent selling during market downturns. The world of investments can be volatile, so preparation is vital.

Crafting a comprehensive financial plan is also part of this financial journey. This includes budgeting, a long-term retirement income strategy, and more. Working with an expert to map this out is recommended. You’ll need to account for potential lifestyle changes and adjust spending patterns during retirement. Be mindful of your expenses and ensure you plan ahead so you’re not entering retirement without a well-thought-out financial roadmap.

What I’ve observed in working with people, planning for retirement, and going through all these financial steps, is that the process naturally brings out the emotional aspect. Specific questions help open up communication channels. Exploring your ideal retirement day and daily routine can lead to discussions that go beyond finances. Money is tied to emotions, and as we peel back the layers, it sparks deeper conversations and brainstorming. Financial scenarios and projections initiate emotional discussions. This progression helps in building understanding.

So, the key is to plan in advance, seek expert guidance, and maintain open communication. This comprehensive approach will help you navigate the complexities of retirement. I hope these insights address your question. Plan ahead, create retirement scenarios, and keep the lines of communication open. If you have more questions, feel free to send them my way at [email protected]. That’s it. I hope I’ve addressed your question. Until next time, take care.