6 Important Money Decisions Retired Couples Need to Make

Applying for Social Security

Just because you're retiring doesn't mean you have to apply for Social Security immediately. Timing is crucial in determining how much you'll receive. And according to Seta Keshishian, a financial planner at JSF Financial in Los Angeles, California, there are several "claiming strategies" to use.

"If you opt to take retirement benefits early at 62, the monthly benefit is reduced to 71.5 percent of the full retirement amount," Keshishian says. "Conversely, just as your benefits are reduced by taking them early, it will increase by about 8 percent annually if you delay taking them." Keshishian advises most clients to wait until the age of 70 to initiate benefits.

Over a year—and especially over a lifetime—this amount can make a significant difference in your financial situation. "Given that, as a population, our longevity is increasing, and many are looking at a 30-plus year retirement, carefully review your choices when it is time for Social Security," Keshishian adds.

Alyssa Jennings, an Overland Park, Kansas-based financial advisor at Edward Jones, says there are other factors beyond age that married couples need to consider. "For example, it may be beneficial for lower-earning spouses to claim spousal Social Security benefits rather than taking their personal benefits," Jennings explains. "Here, too, the lower-earning spouse will receive bigger monthly payments by waiting until full retirement age before filing for benefits."

Another consideration for married couples is the survivor benefit. "The higher wage earner (with the higher Social Security benefit) may want to delay taking Social Security until the full retirement age (or even up to age 70) to maximize the survivor benefit if they expect their spouse could live longer than them," Jennings explains.

Working After Retirement

Earned income can also affect social security, and many retirees still want to work part-time—or even become business owners.

"However, if they are younger than their full retirement age, and their earnings exceed a certain amount, their Social Security benefits will be reduced," Jennings says. "That said, when the individual reaches full retirement age, the individual's benefit will be adjusted to account for the amounts withheld due to earlier earnings."

Putting a Comprehensive Plan in Place

A 401(k) or Social Security can be a strong asset in a retirement plan, but Garcia warns that they shouldn't be the only part of your overall plan to generate income in retirement. "Having only one vehicle can put you at a disadvantage when it comes to efficiently generating income from your savings," Garcia says.

"A more comprehensive plan might include some type of guaranteed income (e.g., a pension, annuities), tax-deferred retirement accounts like an IRA, and post-tax savings vehicles like Roth accounts," Garcia explains. Garcia also recommends considering whole life insurance. "It can build cash value that's not affected by the markets and provide a lifetime death benefit that protects your family during your working years." In addition, Garcia says non-qualified investments are something else to consider since they can provide flexibility to assess your money before retirement.

Completing Your Estate Plan

You probably have some estate planning documents, such as wills, power of attorney documents, and health directives. However, Eido M. Walny, JD, founder of Milwaukee-based Walny Legal Group, recommends reviewing those records to see if you need to make revisions based on the following:

• Has your tax situation changed?
• Has the law changed in a way that impacts you?
• Are you still in contact with the people you've named in your document—and are they all still alive?
• Have beneficiary designations been updated?

"Retirement is a good time to check all of that, and if you don't have your documents together, retirement is a perfect time to get that checked off the bucket list," Walny says.

Planning for Health Care and Long-Term Care

If both of you are in good health, that's great—but this may not always be the case, especially as you age. "On average, for 20 years after retirement—meaning approximate ages 65 to 85—health care costs are typically in the range of $250,000 per couple," says Sheraz Iftikhar, CEO and founder of Arch Global Advisors in New York, New York. "A quarter of a million dollars is a large amount and is something that everyone should prepare for, no matter what." Iftikhar recommends thinking about these costs early so you can put aside money.

Something else retired couples may not want to think about: a nursing home. Again, this is one of the statistics related to people living longer, and according to Walny, the probability that one of you will end up in a nursing home is pretty high.

"Nursing homes are expensive and can run $5,000-$10,000 per month, so some thought should be given to whether that sort of care is a concern and how it should be dealt with," Walny says. Straight-up saving money is one option, and if you don't wait too long, getting long-term care insurance may still be viable.

"Otherwise, some specific Title XIX planning might be an option; in any case, this is an important conversation that many people put off for too long and, in doing so, options will be forced on them," Walny adds.

Deciding Where to Live

There's a tendency for retired couples to remain in the house where they raised their kids. There are so many memories there, and it is a place for everyone to come home to during the holidays. However, Ellen I. Sykes, a broker for Coldwell Banker Warburg Realty, says retirees should consider a different perspective.

"Generally, the moment you retire, you are paying for what you don't need, whether it is property taxes based on a big house, monthly HOA fees, or maintenance," Sykes explains. Instead, Sykes recommends downsizing to cut costs—and save or invest that extra money. "You could also choose to rent and put all of the money in the bank."

If you move out, Sykes recommends finding a one-story residence. If the home has steps, make sure the primary bedroom is on the first floor. "Find something that is wheelchair-friendly and also think of a separate bedroom and bath for a caretaker, so you have the option of staying home in the case of an illness or accident."

And if you want a mortgage, Sykes recommends getting one that you can pay off relatively quickly. "If you have a lot of income in the first part of retirement, use that to become debt-free since studies show that the most common cause of anxiety for...retirees is running out of money."