Split Decision: He Quits, She Keeps Working
When one spouse retires and the other doesn't, they need to adapt to a new financial reality—and some very different lifestyle choices
By Joan Caplin

(MONEY Magazine) – Consider how much there is to fight about in a marriage. He spends; she saves. He drinks out of the milk carton; she hangs lingerie from the shower rod. Even before they tie the knot, most would-be spouses are well-acquainted with the big and small stresses that can pull at couples.

Yet it's the rare husband and wife who discuss, two or more decades in advance, the age at which they want to retire. Then the moment arrives. The lucky ones, totally in sync, plan leisure trips and other joint pursuits. The not-so-lucky ones find themselves stunned by their contrasting views on when to turn in their briefcases, and at odds about how to coordinate two very different lifestyles.

Take the case of Bob Graul and Laurie Van Cleve of Orange, Calif. During their 17 years together, they never really talked about retirement until the issue was thrust upon them in December 2000. That's when Graul, a senior sales and marketing manager, unexpectedly received a buyout offer from his longtime employer, Dow Corning. "We had only three weeks to make a totally life-changing decision," recalls Van Cleve, an account administrator for a small, rapidly growing defense contractor. From the start, the couple had strongly opposing views: After more than three decades at the company, Bob, who was 53 at the time, felt he wasn't wanted any longer; Laurie, then only 47, strongly believed he was overreacting.

Van Cleve was concerned about money: Graul was earning $125,000 a year; she was making $65,000. Could they really afford to lose his salary? But Van Cleve, who had no immediate plans to retire, was also worried about the effect on their marriage and lifestyle. "We used to joke that our relationship was based on Bob's being gone all the time," she says.

Graul did end up taking the buyout, leaving Dow Corning in March 2001. Now, four years later, the couple is still dealing with the financial and emotional ramifications of his retirement. In some ways it's been considerably easier than they feared—and, in others, much more challenging.

Making the decision The fact is, asynchronous retirement raises complicated questions, financial and otherwise. Among them: How will one spouse's decision to retire affect the other's retirement planning? Will the couple need to tap their nest egg sooner than expected? Then there are the emotional issues: How will the retiree fare alone all day while the working spouse is at the office? Will the working spouse view the retiree differently when his or her professional identity no longer exists?

Graul and Van Cleve have plenty of company as they grapple with these issues. Only about 20% of working couples retire in the same year, and just half do so within two years of each other. In some cases, one partner is forced into early retirement by poor health or a job loss. In others, husband and wife are simply at different points in their careers. Perhaps one spouse went back to work after staying at home for several years to raise children and is enjoying a career resurgence, just as the other is burning out after decades of continuous service. Or maybe one spouse is simply older than the other; typically, as the age difference between partners widens, so does the gap between retirement dates.

Despite how common these situations are, few couples are prepared when it happens to them. Graul, for example, hadn't really anticipated retiring before age 60. But almost as soon as Dow Corning offered him a buyout, he felt he should take it. Major changes were going on at the company—his bosses were also offered packages—and Graul knew that first offers are usually the best ones. He also thought his age would increasingly work against him if he stayed. "They figure they can hire two 20-year-olds and pay them less than they're paying a senior person," he says.

Van Cleve, on the other hand, was too worried about money to be persuaded that taking the package was the right move. "I expect to live longer than Bob, and I have no children," she explains. "Who will take care of me when I'm old?" During the three-week window that Graul had to contemplate the offer, the couple discussed the pros and cons almost continuously, starting at 6 a.m. when they took their daily walks. "Several of those mornings it got pretty warm," Graul recalls. "We'd end up walking in different directions."

To reassure his wife (and himself), Graul did some serious number crunching. As long as Van Cleve was working, he figured, they would have as much money to live on as when he was employed. He'd no longer be making 401(k) contributions, of course. His wife's salary was steadily rising. And under the terms of his buyout deal, Graul would be entitled to full health benefits and a pension of $70,000 a year if he elected the single-life annuity option, under which benefits would end on his death. (The joint-and-survivor options would provide less, but his wife would continue to get 50% to 75% of those benefits after he died. Given Van Cleve's earning prospects, Graul felt safe in electing the higher payout.) Graul also figured that once his wife retired, they'd be able to pare down their living expenses by 15% or so.

Van Cleve's greatest financial fear was that if anything ever happened to her husband, she wouldn't be able to keep up the payments on their $720,000 home. Graul figured he could ease that concern by purchasing term life insurance that could be used, if needed, to pay off the $221,000 balance on their mortgage. The cost would be less than $150 a month. But no matter how many times Graul ran the numbers, Van Cleve could not be mollified. In the end, says Graul, "I think what convinced her is that I told her I'm going out the door whether I want to or not. So I want to do it now on my terms."

Life after retirement As it turns out, during the first four years of Graul's retirement, money has not been a problem. Van Cleve earned $90,000 last year and managed to save $16,000 in her 401(k) without straining their budget. Between them, the couple now have a $742,000 retirement nest egg, which they don't expect to tap for several years.

The bigger challenge has been adjusting to their changed roles and now profoundly dissimilar lifestyles. Graul initially grappled with feelings of lost identity—without his job, who was he really? Van Cleve worried that her husband would become an isolated couch potato, exercising neither mind nor body. "I didn't want him sitting at home with his feet up, watching a ball game all day," she says. She also worried about how his retirement would affect her own schedule. With the long hours and travel her husband's job had required, she'd been used to coming and going as she pleased. With Bob waiting for her at home, she no longer felt that freedom.

Encouraged by Van Cleve, Graul began looking for part-time work. He soon found a job, but not exactly the kind his wife had in mind. In spring 2001, Graul began parking cars at Disneyland Resort. "They wanted me to work in supervision," he recalls, "but I didn't want that kind of responsibility anymore." His salary: $7.21 an hour.

Eight months later, Graul switched jobs again when the manager in the wine section of a gourmet store where the couple often shopped offered him a position. He now works three days a week, earning $13,000 a year, stocking shelves and helping customers choose the right Merlot. On his days off, he plays golf and takes care of the chores—shopping, vacuuming, picking up the dry cleaning—that used to be largely his wife's responsibility.

Graul is delighted with his new life, relishing the slower pace and lack of stress. "I don't think he realized how much the job was taking out of him, until he was out of it," says Van Cleve. But Graul does confide the suspicion that his wife is a bit embarrassed by what he does now. (Van Cleve admits only to feeling her husband is "underemployed.") He also longs to spend more time together. "The sooner Laurie retires, the better," he says. "I'd like to have a playmate."

The advisers weigh in Graul probably won't be scheduling those playdates anytime soon. Van Cleve expects to continue working full time for the next five years at least, then may switch to part time starting around 2009. Her salary, combined with Graul's pension, should enable the couple to live comfortably over the next few years without dipping into savings. But to make sure they can maintain their standard of living once they're both retired, they need to do some financial prep work now, according to the planners that MONEY consulted. Here is their advice:

• Keep that portfolio growing. With more than 40% of their assets in fixed-income investments, the couple's portfolio is too conservative, believes Karl Romero, a certified financial planner from Santa Ana, Calif. "If they continue this style of investing," he says, "they'll run out of money in 2033." Romero suggests that, until Van Cleve retires, they reduce the fixed-income portion of their portfolio to 15% and invest that money instead in big-cap growth and value mutual funds. When she retires, Romero says, they would probably want to increase their fixed-income allocation again. And, he advises, they should both open Roth IRAs.

• Coordinate future benefits. If Van Cleve retires before she becomes eligible for Medicare at age 65, she can switch to Graul's employer-provided health insurance—an option that many retirees aren't lucky enough to have. Even though both spouses will be eligible to collect reduced Social Security benefits at age 62, Linda Erickson, a certified financial planner in Greensboro, N.C., suggests they wait until full retirement age to get a higher payout. The reason: They won't need the money to cover their living expenses—especially since both plan to continue working part time, which could further erode their benefits (see the box at left).

• Buy long-term-care insurance. "Bob's health insurance doesn't cover long-term care," explains Orlando planner David Streit, "and half of us will end up needing it." Romero recommends buying a policy that pays $150 a day for nursing home or home health care, with an inflation adjustment. The estimated cost is around $200 a month.

Graul and Van Cleve have already implemented the planners' investment recommendations. Van Cleve, however, isn't convinced that they'll have enough to make it through retirement. "I think we still need to pay attention," she says. Concedes Graul: "I'm learning as I go that retirement is an ongoing process."