harder choice. Someone who hasn’t
worked enough to earn Social Security
benefits can’t claim a spousal benefit
until the earner claims his or her ben-
efit. If the couple can afford to go
without Social Security income until
70, they may want to wait. If not, they
should aim to delay claiming at least
until full retirement age.
The class of baby boomers who
can take advantage of the “restricting
an application to spousal benefits”
strategy is rapidly diminishing, but if
you were born before January 2, 1954,
you still qualify. The strategy allows
the higher-earning spouse to restrict
an application to spousal benefits only,
giving the beneficiary some Social
Security income (50% of the spouse’s
benefit). Meanwhile, his or her own
retirement benefit can grow until
age 70. The beneficiary must be full
retirement age, and the lower-earning
spouse must have already claimed his
or her benefit. To take advantage of
this strategy before it disappears, be
aware that some Social Security rep-
resentatives may be unaware of the
strategy. You may need to speak to
a supervisor to resolve the issue.Choose the Best
Health Coverage
Health insurance doesn’t come cheap
for families: A survey by the Kaiser
Family Foundation found that annual
family premiums for employer-spon-
sored health insurance rose 5%, to an
average of $20,576 in 2019. If you and
your spouse can both access health
insurance through work, you’ll need
to choose between keeping your own
individual plans or doubling up under
one. If you have children, you can
cover them under one parent’s plan or
move the whole household onto a fam-
ily plan. More employers are breaking
their coverage options into tiers, says
Tracy Watts, senior partner at benefits
consultant Mercer, with the “employee
plus children” category often costing
less than “employee plus spouse” or
“employee plus family.”
Add up the annual premiums for02/2020 KIPLINGER’S PERSONAL FINANCE 41If that isn’t an option, you can roll
the after-tax contributions to a Roth
IRA once you retire or leave your
job (you’ll owe taxes on any pretax
amount), and roll the earnings on
the after-tax portion and pre-tax de-
ferrals to a rollover IRA to continue
tax-deferred growth.
It often makes sense to invest most
of the Roth 401(k) in stocks to take
advantage of the higher growth poten-
tial free from taxes, while opting for
a more conservative mix in the tradi-
tional 401(k) because you’ll probably
take that money out first. Your indi-
vidual plans may look unbalanced, but
think of them as a marital asset rather
than two personal accounts, says Eric
Ross, a CFP with Truepoint Wealth
Counsel in Cincinnati.
You will need to get even more
creative if only one spouse is working.
One option for couples who file a
joint return is for the working spouse
to open and contribute to a Roth or
traditional “spousal IRA” for the non-
working partner. In 2020, the couple
can deduct up to $6,000 —$7,000
if the non-working spouse is 50 or
older—in contributions to a traditional
IRA as long as the couple’s MAGI is
$196,000 or less.
Jesse and Roxanne Lopez, who
live in New Albany, Ohio, have mostly
contributed to his retirement accounts
for the past 14 years as she stayed
home with their three children and he
worked as an anesthesiologist. About
six months ago, Roxanne launched her
own business, MakeItJustSew.com.
Once her website starts earning
money, she plans to open a solo 401(k)
or self-directed IRA to ramp up their
retirement savings. Until now, they’ve
been limiting themselves to the low-
cost index funds offered through
Jesse’s workplace account. But once
Roxanne opens her own plan, she can
choose from a broader mix of funds.
Coordinate
Social Security Benefits
You and your spouse can maximize
Social Security by coordinating when
you claim benefits. One solid strategy
for a dual-income couple is for the
higher earner to delay claiming until
age 70. Benefits grow 8% each year
after full retirement age until age 70.
(FRA is 66 for people born in 1954 but
it gradually rises to 67 for people born
later.) Meanwhile, the lower earner
could take his or her benefit earlier
to provide income to pay expenses.
Single-income couples may face aAre you and your spouse on the same page
when it comes to your finances?- If both of your employers offer health insur-
ance benefits, it’s always better to drop one
plan and enroll in the other plan as a couple. - He is paying off $10,000 in credit card bills,
while she pays the balance on her cards in full
every month. Because they’re married, they’re
both responsible for his debt. - If one spouse invests aggressively in the
stock market and the other keeps money in a
low-interest savings account, they’re better
off keeping their investing lives separate. - One spouse has an excellent 780 credit
score, while the other has a less desirable - They want to apply for a mortgage. The
couple’s best bet may be to apply for the loan
based solely on her income. - When there’s cash to spare, one spouse
wants to put it into a savings account, and
the other would like to spend it on biking gear.
The best way for a spender-saver match to
head off a fight is to keep some of their money
separate. - You want to save money for your kids’
future college education and for your retire-
ment. Your best bet is to divide your savings
between the two.
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