Mike Palmer Quoted in MarketWatch: Planning for a "Two Speed" Retirement: Navigating Age Gaps and RMDs
Planning for married couples with a significant age disparity is increasingly common. Navigating the complexities of this can be confusing and mistakes costly.
A recent reader reached out to MarketWatch with a dilemma that is becoming increasingly common among the families in Raleigh that we serve at Ark Royal: how do you plan for a shared future when one spouse is significantly younger than the other?
In this case, the husband is 75 and managing some health concerns, while his wife is 65 and still working. With a seven-figure portfolio currently sitting in conservative vehicles like CDs and I-Bonds, they were looking for a roadmap for the next five years—specifically regarding Required Minimum Distributions (RMDs) and long-term security for the younger spouse. You can read the entire MarketWatch column here (I Don't Have Long Left, But My Wife is 10 Years Younger)
Ark Royal's Mike Palmer had the opportunity to weigh in on this scenario for MarketWatch. Here are the key planning pillars we discussed for couples navigating a "two-speed" retirement.
1. The RMD "Joint Life" Advantage
When one spouse is more than 10 years younger, the IRS provides a specific break that many retirees overlook. Typically, RMDs are calculated using the Uniform Lifetime Table. However, if your spouse is more than 10 years younger and is your sole beneficiary, you can use the Joint Life and Last Survivor Expectancy Table.
Why this matters: This table assumes a longer combined life expectancy, which results in a smaller required distribution. This allows more of your money to remain in the tax-deferred "wrapper" of your IRA, potentially reducing your tax bill and preserving more capital for the younger spouse’s future.
2. Solving the "Cash Drag" Problem
The couple in the article had a significant portion of their wealth in CDs and I-Bonds earning around 4.25%. While that feels safe, it creates a "purchasing power" risk—especially for a 65-year-old wife who may need that capital to last another 30 years.
We often see "cash drag" in portfolios where investors are afraid of market volatility. However, for a younger spouse, some growth-oriented exposure (equities) is usually necessary to outpace inflation. At Ark Royal, we focus on an asset allocation by design—one that provides enough liquidity for the 75-year-old’s immediate needs while ensuring the 65-year-old’s "future self" isn't left with a depleted portfolio.
3. Coordinating Social Security
In an age-gap marriage, the timing of Social Security is a team sport. If the higher-earning spouse waits until age 70 to claim, they maximize the survivor benefit. For this couple, if the husband (the higher earner) maximizes his benefit, that higher check will continue for the wife’s lifetime after he passes away. It is often the best "insurance policy" a husband can provide for a younger wife.
4. The Tactical Five-Year Window
The next five years are critical for this couple. As RMDs kick in, they shouldn't just "take the money and run."
Reinvestment: If the RMD isn't needed for living expenses, it should be moved into a taxable brokerage account and reinvested according to their long-term growth needs.
Roth Conversions: Depending on their tax bracket, it may make sense to convert portions of the IRA to a Roth IRA now, especially before tax rates potentially rise or before RMDs push them into a higher bracket.
The Bottom Line
Retirement planning isn't just about a single number; it’s about a timeline that accounts for two different lives. If you have a significant age gap in your marriage, your plan needs to be dual-lensed: providing security and income today, while ensuring growth and inflation protection for the decades ahead.
