When you’re in love, the age difference is the last thing you will think about. Huge age-gap relationships are more common than most people realize. Celebrities are usually the ones who get into marriages with significant age gaps but it also happens around the world. The most recent U.S census data showed 10 percent of marriages with an age gap of more than 10 years. Although these relationships may sound harmless, it does create a major drama when couples start to retire. The reason being is that big gap adds more pressure on a couple’s finances to support a stable, and highly possible long retirement.
The most difficult and crucial part of planning for couples with a big age difference is making sure the younger half of the pair won’t worry about the finances later on in life or probably as a widow or widower. You will need to establish different strategies to maximize benefits, set the correct balance of your investment portfolio as a couple, and figure out beneficial ways to stretch the assets you already owned.
However, it’s important to first identify the unique issues in the area of retirement, financial and estate planning for age-gap relationships that need to be given a closer look.
Deciding on When to Retire
This issue is not surprising since the age difference could be a half-generation or more and each spouse could be in different life stages psychologically particularly in terms of retirement. Deciding whether to retire simultaneously or who will retire first before the other can affect the dynamics of the relationship in ways that they haven’t come across with before.
In order to meet the expectations of both spouse, their vision of retirement must be discussed appropriately within their relationships. Consulting a financial advisor, attorney, or another financial professional will help couples resolve these issues and to make sure there is peace of mind in approaching the retirement for a successful result in both parties.
Making Necessary Calculations
Included in the financial planning are asset allocation and distribution patterns from investment accounts. Remember, the main goal is to keep a balance between the older spouse's interest and the younger spouse’s age difference. If the couple’s entire asset allocation depends on the older spouse with a shorter time horizon, the partner who survives may not enjoy additional growth and earnings because of a more conservative allocation. It’s imperative that investments are suited to the goals of the couple and their individual time horizons.
Another significant part of financial planning is understanding the different rules for withdrawing assets especially when it comes to Required Minimum Distributions (RMD) from retirement accounts. It’s common for people to calculate withdrawals based on the Uniform Lifetime Table but it must be noted that the rules can change on certain age gap couples that couple offer some tax benefits.
To calculate one’s IRA required minimum distribution and say your spouse is 10 or more years younger than you, it’s best to use the Joint Life and Last Survivor Expectancy table in calculating your RMD. You will find that the smaller RMD will lower your taxable income.
Complicated Family Dynamics
Most age-gap marriages typically involve one being previously married and has children. This can cause complications on the family dynamics that often results in a mandatory management of pressures from children of a previous marriage and an age gap spouse. The involvement of children from a previous marriage may cause a little dent in the relationship. It is usually the younger spouse who has to accept and deal with children that aren't his or hers but often times this doesn’t happen. The key to avoiding future misunderstandings is family communication.
A strong estate plan plays an important role in age gap marriages to balance the longevity issues related to a younger spouse with the assurance that children from the previous marriage are covered.
Advanced Financial Planning is a Must
Its safe to say that the number of age gap relationships will increase more in the future. Although the financial planning challenges gap marriages face are unique and complex, addressing them in advance will help create an open, honest, and productive communication between the spouses as well as their respective families.
