When you meet the love of your life, it’s natural to imagine growing old together. However, many couples don’t consider the practicalities of how that journey will unfold. For couples with a significant age gap, retirement planning can bring unique challenges, requiring extra care to align differing goals, timelines, and priorities.
Case Study: Maree and Dan
Take Maree (55) and Dan (68), for example. Dan was ready to retire and explore the world, while Maree still felt invested in her career. They had differing timelines, energy levels, and concerns about long-term financial security. Instead of avoiding tough conversations, they leaned into them, and together they:
Talked openly about their visions for retirement and found ways to compromise.
Decided to prioritize travel early in their retirement while Dan was still mobile.
Discussed their fears, which led to better planning for health and longevity risks.
Through these conversations, Maree and Dan gained clarity and direction, allowing them to create a tailored retirement plan that worked for both of their unique needs.
How They Designed a Plan That Met Their Needs
After their conversations, Maree and Dan consulted a financial adviser to build a comprehensive plan that aligned with their goals and addressed their age-gap challenges:
1. Prioritizing Early Travel with Creative Working Arrangements
Maree and Dan prioritized early travel while balancing Maree’s career. They planned a year-long trip, with Maree using six months of long service leave and negotiating remote work at 30 hours per week for the remaining six months. In the following years, Maree transitioned to contract-based work, taking 3- to 6-month projects that allowed for travel between contracts. Dan also picked up occasional work to stay engaged. By the time Maree reached age 60, they scaled back their travel, and she returned to a four-day workweek, blending flexibility with financial stability.
2. Taking Advantage of the Tax-Free Pension Environment
Dan leveraged the tax-free pension environment by commencing an account-based pension with his superannuation upon retirement. This allowed him to draw a regular, tax-free income to support their living expenses and travel plans. Maree and Dan structured their finances carefully to meet their immediate needs while securing long-term benefits. Dan’s pension payments, combined with Maree’s employment income, covered their expenses and left room for Maree to maximize her concessional contributions to superannuation. This strategy not only enhanced their current lifestyle but also strengthened Maree’s retirement savings for the future.
3. Structuring Assets to Optimize Centrelink Benefits
Maree and Dan strategically adjusted their assets to qualify for Centrelink benefits. With $400,000 in personal cash and investments, they made a $360,000 non-concessional contribution to Maree’s superannuation, which was exempt from the assets test while she remained under Age Pension age. They used $30,000 from their savings to purchase flights and accommodation for their year-long travel plans. These changes reduced their assessable assets below the Centrelink cut-off threshold, enabling Dan to receive a partial Age Pension. This additional income supplemented their retirement funds, providing greater financial flexibility and security.
4. Ensuring Long-Term Financial Security for Maree
To safeguard Maree’s financial future, they incorporated strategies that provided stability and protection. They purchased a Lifetime Annuity, ensuring a guaranteed income stream for Maree in the event of Dan’s passing. This approach gave Maree and Dan the confidence to embrace retirement on their own terms, proving that age-gap relationships can thrive with the right balance of communication and planning.
Strategies to Align Goals
Successfully navigating retirement as a couple with an age gap involves focusing on three key areas: lifestyle planning, financial planning, and estate planning.
1. Lifestyle Planning
A significant age gap often means partners will experience different stages of health, energy, and mobility at different times. This can impact decisions about travel, housing, and leisure activities.
2. Financial Planning
Financial strategies must account for the younger partner’s longer retirement horizon and the older partner’s immediate needs. Key considerations include:
Superannuation and Income Streams: Ensure both partners have sufficient superannuation.
Centrelink Benefits: Couples with an age gap may be able to optimize Age Pension eligibility.
Longevity Risk: Structure investments to ensure income lasts throughout both partners’ lifetimes. This might include diversifying assets or using annuities to provide a guaranteed income stream.
3. Estate Planning
Protecting the financial well-being of the younger partner is critical. Estate planning ensures assets are distributed fairly and legally.
Wills and Beneficiary Nominations: Keep these up to date, especially for superannuation and life insurance policies.
Powers of Attorney: Establish who will manage financial and medical decisions if one partner becomes unable to do so.
Trusts or Testamentary Arrangements: These can provide for the younger partner’s future while respecting obligations to other family members.
Conclusion
Retirement planning is rarely straightforward, and for couples with an age gap, it’s even more nuanced. However, Maree and Dan’s story demonstrates that retirement planning for couples with an age gap doesn’t have to be overwhelming. By leaning into honest conversations and working with a financial adviser, they were able to design a plan that balanced their differing timelines, financial needs, and lifestyle goals.
For couples in a similar situation, their approach serves as a roadmap: start with meaningful discussions about what matters most, and then develop a strategy that aligns with your unique circumstances. With the right planning, you can overcome challenges, optimize your resources, and create a fulfilling retirement that works for both partners—today and in the years to come.
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