Retirement Planning With A Younger Spouse (FQF)

This podcast discusses retirement planning when one spouse is significantly older than the other, focusing on the impact of a potential early death on Social Security, withdrawal rates, and tax implications for the surviving spouse. The speaker explores several related topics, emphasizing the need for careful planning and potentially using financial software to model different scenarios. The speaker ultimately recommends utilizing financial tools to create customized retirement plans and emphasizes that a Roth conversion might be a useful strategy.

Retirement Planning with Age Gap

• 00:00:46 Retirement planning for couples with a significant age difference involves unique considerations, primarily concerning the potential death of one spouse before the other. Key factors include Social Security claiming strategies and withdrawal rates, as the surviving spouse's financial needs may differ. The speaker suggests using financial tools to analyze these scenarios, such as Balden, Prana, and New Retirement.

Social Security Claiming

• 00:01:47 When a couple has a large age difference, Social Security claiming strategies can be significantly impacted. The higher-earning spouse, often the older one, could benefit from delaying Social Security until age 70, which increases their benefits. The surviving spouse will receive the higher payout, which could be critical given the longer life expectancy.

Withdrawal Rate & Expenses

• 00:03:04 Withdrawal rates in retirement should be adjusted based on the ages of the spouses, with a younger spouse requiring a potentially longer period of income. The speaker suggests that the traditional 4% rule may not be ideal for such scenarios. The death of one spouse will decrease expenses, but tax status also changes, which can significantly impact the remaining spouse's income.

Taxable vs. Retirement Accounts

• 00:10:32 The speaker advises keeping tax-efficient investments, such as low-cost index funds, in taxable accounts and holding assets like bonds and REITs within retirement accounts. He also explains his preference for Roth IRAs for stock index funds and traditional accounts for bonds, primarily to manage tax implications over time. The speaker recommends using tools like Balden and Prana to understand the implications of various strategies.

Roth Conversions

• 00:14:16 The speaker suggests evaluating whether Roth conversions make sense based on current and future tax implications. Roth conversions should be prioritized if taxes are lower today versus in the future, but the speaker cautions that you'll need to wait five years before you can spend the converted funds without penalty. The speaker acknowledges that Roth conversions can be complex but encourages utilizing tools like Balden and Prana.