If you and your spouse have both been working throughout your careers, your household has likely grown accustomed to the stability that comes with two incomes. There is a certain financial rhythm to it. Bills get paid, savings get built, and the day-to-day costs of running a household may feel manageable when there is income coming in from both directions. Retirement can have a way of disrupting that rhythm, sometimes gradually and sometimes all at once. When one spouse steps away from work, or when both do around the same time, the income picture shifts in ways that couples may not fully anticipate until they experience it. 

Income Drops. Expenses May Not

According to SmartAsset, a common rule of thumb suggests that couples who want to maintain their lifestyle in retirement may need roughly 70% to 80% of their pre-retirement income to do so. For a household earning $120,000, that could mean planning for approximately $84,000 to $96,000 per year after retiring.[1] Social Security may replace only about 40% of a typical worker’s pre-retirement income.[1] The gap between those two numbers is what a retirement plan will typically address, and it is a gap that could feel larger than expected for some when actually living it. 

Some expenses do go away in retirement. Payroll taxes and commuting costs are real savings. But those could be offset by increases in healthcare spending, travel, and the cost of simply having more time to spend money. In my experience, some couples can be surprised by how much their lifestyle costs when every day feels like a weekend. 

Why Social Security Timing Deserves Attention 

Social Security timing decisions play a significant role in how this transition unfolds. For a household where both spouses have been working, there are two earnings records in play, and the decisions about when each spouse claims could have a meaningful impact on lifetime income. 

Claiming early may reduce your benefit by up to 30%. Waiting until age 70 will increase it by roughly 8% per year beyond full retirement age.[1] For a couple with two earnings records to consider, getting this sequencing right can be an important decision in the retirement planning process. 

The right approach depends on your health, your other income sources, need for immediate income, and which spouse has the higher earnings record. There is no single answer that works for every couple, which is exactly why I work through this individually with each client rather than applying a blanket rule. 

The Order You Draw From Savings May Matter Too  

Beyond Social Security, the order in which you draw from your savings and which accounts you pull from first could have real tax implications. Drawing from a traditional IRA or 401(k) before a Roth account, or vice versa, may affect how much of your income is taxable in any given year. 

For couples moving from two incomes to one, or from one income to none, that sequencing decision is worth thinking through carefully before you get there. The window between your retirement age and when required minimum distributions begin could be an opportunity to manage your tax picture in a way that may not be available later. 

Understand the Gap

The gap between what you earn as a working household and what you will have as a retired one is worth understanding before you get there, not after. In my experience working with couples in the DFW area, those who are able to navigate this transition comfortably are typically those who had the conversation early enough to make a plan for intentional decisions about timing, accounts, and income structure, and their circumstances allow them to stick to that plan. 

This is one of the areas where I consider the financial planning side of my work to be just as important as the investment management side. Getting the income picture right in retirement is not just about how much you have saved. It is about how thoughtfully you draw it down. Of course, life can have a way of handing us unforeseen circumstances that get in the way of even the best-laid plans. An unanticipated health event could derail any plan, and considering that as part of your plan can be critical, but not everyone has the personal wealth to cover every unexpected scenario.

If you have questions about how retirement may change your household income picture, reach out. That is exactly the kind of conversation I am here for. 

Sources 1. www.smartasset.com/retirement/how-much-money-does-a-couple-need-to-retire