Email FacebookTwitterMenu burgerClose thin

Retirement Planning for Married Couples

Byline profile imageWritten by Ashley Kilroy
|
Byline profile imageEdited by Patrick Villanova, CEPF®
Updated on
Share

Retirement planning for married couples involves estimating future expenses, understanding income sources and determining how much savings are needed to maintain a desired lifestyle. When considering how much a married couple should have for retirement, factors like age, anticipated healthcare costs and desired retirement age play a significant role. Many financial experts suggest aiming for savings that cover 70-80% of pre-retirement income annually, though individual needs can vary widely. Calculating this amount requires evaluating current savings, expected Social Security benefits and investment returns to create a plan tailored to a couple’s specific goals.

Whether you’re married or single, you may benefit from working on your financial plan for retirement with a financial advisor. Speak with your financial advisor matches today.

Get on the Same Page

The first step to set yourselves up for success in retirement as a couple is to ensure that you are on the same page. You should discuss:

  • What your expectations are for retirement, including the lifestyle you want to lead.
  • If you plan to move or downsize your home.
  • How you will manage your money, including how much you’ll spend.
  • When you want to stop working and enter retirement.

You may also want to discuss Social Security and if you want to factor Social Security income into your retirement saving strategy.

Retirement Saving Strategies

Once you and your spouse have communicated about your retirement expectations, you are ready to start making financial moves. The first step to a successful retirement is to save well. Use a retirement calculator to see how much you need to save you reach your goals, and then put together a plan to get there.

Financial experts often recommend planning for annual income that replaces 70-80% of pre-retirement earnings, though this may vary depending on lifestyle goals and debt levels. Couples should also consider inflation, potential healthcare costs, and longevity to ensure their savings will last.

There are plenty of savings strategies and tax-advantaged accounts, and a financial advisor can help you understand how to use them to reach your goals. Here are a few of the most popular savings strategies.

401(k) Contributions

Many employers offer a 401(k) for their employees. This allows you to contribute pre-tax dollars to a retirement account, lowering how much you pay in income taxes that year.

Some employers even match an employee’s contribution up to a certain percentage. This is free money that your company gives you in exchange for saving for retirement. Most experts will advise putting at least as much into your 401(k) as an employer will match. For example, if your employer matches your contributions up to 4%, you should contribute at least 4% to receive the entire match. But you can contribute a lot more than that – up to $23,000 in 2024 and $23,500 in 2025.

Also, people who are 50 and older can make “catchup contributions” to a 401(k) or similar workplace retirement account of up to $7,500. As a result, a person who’s 50 or older in 2025 can contribute up to $31,000 to a workplace retirement account.

Furthermore, beginning in 2025, individuals aged 60 to 63 will qualify for a unique catch-up contribution option, allowing them to contribute either $10,000 or 150% of the standard catch-up limit for that year, whichever amount is higher. Starting in 2026, the $10,000 threshold will be indexed annually to reflect inflation adjustments.

Double the Roth IRA Contribution

A Roth IRA is an individual retirement account funded with after-tax dollars. You can’t deduct contributions to a Roth IRA at tax time, but you can withdraw your money tax-free in retirement.

With a Roth IRA, married individuals who file taxes separately can contribute up to $7,000 per year into each of their accounts. People over age 50 may contribute an additional $1,000 per year.

However, Roth IRAs do have income limits on contributions that hinge on your modified adjusted gross income (MAGI) and filing status. The IRS sets an income eligibility range that tells you whether you can make either:

  • A) The maximum contribution to a Roth IRA 
  • B) A partial contribution
  • C) No contribution

For single filers, heads of household or married filing separately (not living with a spouse), the 2024 contribution limit phases out between $146,000 and $161,000, with no eligibility above $161,000. For married couples filing jointly or qualifying widow(er)s, the phase-out range is $230,000 to $240,000, with no eligibility above $240,000. Married individuals filing separately who lived with their spouse face a reduced contribution limit if MAGI is under $10,000 and no eligibility above that. Those who exceed these limits might consider strategies like a backdoor Roth IRA.

In 2025, those limits will increase to $150,000 and $165,000, with no eligibility above $165,000. For married couples filing jointly or qualifying widow(er)s, the phase-out range is $236,000 and $246,000, with no eligibility above $246,000. The same $10,000 limit applies to married individuals filing separately who lived with their spouse.

Saver’s Credit

The retirement savings contribution credit or saver’s credit is a tax credit that lets qualified individuals enjoy tax breaks above and beyond their normal deductions from IRA or other retirement plans. The saver’s credit helps people to reduce their tax liability, thus offsetting the cost of funding a retirement account. This program incentivizes people to save for retirement.

The saver’s credit is worth a percentage of your contributions. The percentage is either 10%, 20% or 50% . Which percentage tier you fall into depends on your filing status and adjusted gross income. The credit is worth up to $1,000 ($2,000 if filing jointly).

The saver’s credit is a great way for low- and moderate-income couples to save for retirement and save money on their taxes.

Social Security Strategies

Married couples have some advantages when deciding how and when to claim their Social Security benefits. However, it takes some strategy to take advantage of the Social Security rules.

Maximize Lifetime Benefits

If you are a couple with similar incomes and life expectancies, then you might be able to maximize your benefits if you both delay taking your Social Security Income. The reason for this is that the longer you defer your benefits, the more your monthly benefits grow. If you delay each year from age 62 to 70, you could increase your benefit by 8% per year. If you are both healthy and do not need the income, it is wise to put off taking Social Security to maximize the amount you will receive down the road.

Claim Social Security Early Due to Health Concerns

If you and your spouse plan on having a shorter retirement, you might want to think about taking your Social Security benefits sooner rather than later. If you or your spouse are not in good health or you can’t afford your retirement lifestyle, you may want to take your Social Security benefits when they become available at age 62.

Maximize the Survivor Benefit

When one spouse dies, the other is eligible to receive the deceased’s monthly Social Security payment as a survivor benefit if it is higher than their own amount. However, people who choose to take Social Security at age 62 may forfeit this benefit as full retirement age (FRA) is between 66 and 70 depending on when the person was born. Keep this in mind, if you and your spouse are planning to use your Social Security Benefits in case one of you dies before the other.

There are many options for couples when they decide when to collect Social Security benefits. You may choose to both file at the same time, or you may stagger. You can claim as early as age 62 or wait until you are at FRA. Each of these strategies has its advantages and depends on the needs of the couple as well as each person.

Tax Considerations

Retired couple prepares their tax returns

If you are just married or have been married for a while, it is important to be aware of the tax changes you’ll experience after tying the knot. While there are many considerations to make when filing jointly, these are a few of the most common:

  • Filing status options: For many married couples, the tax rate is lower. Additionally, you can claim education tax credits if you are a student and several other status-specific deductions
  • Marriage and tax brackets: Your tax bracket determines the highest rate of tax taken from your income. Each filing status has different tax brackets, so marriage and how you file might affect how much is deducted from your income.
  • Buying and selling a home: If you and your spouse choose to buy a home, you can use both of your incomes to qualify for a mortgage. When you own a home, the mortgage interest that you pay is deductible on your tax return as an itemized deduction.
  • Gift taxes and estate planning: Spouses may gift property, retirement funds, and other assets to each other without paying taxes on them. This is especially important if one spouse dies because the other will be able to take on their estate without tax penalties.
  • Marriage tax penalty: Not all tax brackets double for married couples. It is important to discuss with your tax accountant or another financial advisor before choosing to file jointly in case you end up paying more to file jointly than you would filing separately.

RMD Strategies

Required minimum distributions (RMD) are the minimum withdrawals that people must begin taking from their 401(k)s, traditional IRAs and other tax-deferred accounts starting at age 73 (75 for people born in 1960 or later). However, not all people who reach RMD age need to use the money from their retirement accounts and want to reduce or eliminate the tax exposure that comes from taking an RMD. Some people even continue to invest after they retire. Here are a few strategies to avoid RMDs.

Continue Working

If you continue working and do not own more than 5% of the company you are working for, you may delay the distributions from your employer 401(k) until you retire. If you have a retirement account from a previous employer and have not rolled it into your current account, you will have to take distributions from it.

Convert the Account

Once you have calculated your RMD, consider avoiding taxes on your retirement distributions by converting some of your savings to a Roth IRA. A Roth IRA does not require RMDs, so the money you contribute to it will continue to grow tax-free, and you won’t have to pay tax on your withdrawals permitting that you are older than 59 ½.

When you convert pre-tax dollars to a Roth IRA, you will have to pay taxes on them once. Roth conversions can be costly, so review your options in detail with your tax advisor before you convert any funds.

Donate Your Distributions

Many people would rather see their money go toward a good cause than to the government. If you have a traditional IRA or 401(k), you can donate your RMD to qualified charities. If you donate less than $100,000 straight from your IRA to the charity, you will not have to pay taxes on the RMD.

Donating your RMDs to a charity is a good way to save on paying taxes, since you may have given these donations anyway. You may even feel more inclined to donate more since you’re saving some of your hard-earned dollars.

Plan for Healthcare Costs

Healthcare costs are a significant expense for retirees and should be factored into any retirement plan. According to Fidelity Investments’ 2024 Retiree Health Care Cost Estimate, a 65-year-old retiring in 2024 can expect to spend an average of $165,000 on healthcare expenses throughout retirement. This estimate, which assumes enrollment in traditional Medicare (Parts A, B, and D), has risen nearly 5% from 2023 and is more than double the inaugural estimate from 2002.

Despite these figures, many Americans underestimate their future healthcare costs. Recent research from Fidelity shows the average individual believes they will spend about $75,000 in retirement – less than half of the actual projection. This discrepancy highlights the need for married couples to plan proactively, accounting for not just Medicare premiums but also out-of-pocket expenses such as dental, vision and over-the-counter medications, which are not covered by Medicare.

Couples can mitigate uncertainty by exploring supplemental insurance options, such as Medigap or Medicare Advantage plans, and setting aside dedicated savings for unexpected medical needs.

They can also save for future healthcare expense throughout their careers using health savings accounts (HSAs.) These triple-tax-advantaged savings accounts are only available to those enrolled in high-deductible health plans (HDHPs), but they can enable a married couple to save up to $8,300 in 2024 and $8,550 in 2025 ($4,150 and $4,300 for self-only coverage, respectively).

Bottom Line

Retired couple

Married people should communicate how they want their retirement to look. Some people want to save just enough during their working years, and others want to save enough to live a lavish retirement. While you have many options for how you will save for retirement, you also should consider how you will take your savings during retirement. By putting the right savings and distribution plans in place, you can live the retirement of your dreams.

Tips for Retirement Planning

Photo credit: ©iStock.com/Moyo Studio, ©iStock.com/shapecharge, ©iStock.com/Ridofranz