Couple Retirement Planning: Why One Number Will Fail You Both

Two lives, one retirement plan — and that's exactly where high-net-worth couples go wrong. If you and your spouse are treating your retirement as a single financial event, you may be leaving serious money on the table or walking into a tax nightmare you never saw coming. In this episode, we break down why using one combined number in your retirement planning is a costly oversimplification — especially when you have $1 million or more in investable assets. From staggered retirement dates and Social Security timing to healthcare costs and wealth management strategies that work for two distinct financial lives, we cover what fiduciary, fee-based financial planning actually looks like for couples navigating this transition. Whether you're five years out or already retired, this conversation will change how you think about your shared financial future. Ready to talk? Schedule a complimentary discovery call at TDWealth.net. For educational purposes only. Not investment advice. 📖 Full show notes: https://tdwealth.net/couple-retirement-planning-why-one-number-will-fail-you-both/

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SPEAKER_00 0:00

Imagine planning for your entire future, um, doing everything by the book, you know, saving diligently for decades.

SPEAKER_01 0:07

Right. Playing by all the rules.

SPEAKER_00 0:09

Exactly. And then you realize that a single mathematical assumption just cost you half a million dollars.

SPEAKER_01 0:13

Aaron Ross Powell Half a million. Just vanished.

SPEAKER_00 0:16

Gone. Entirely because of a bad formula in some generic online retirement calculator. I mean, that is not a rounding error.

SPEAKER_01 0:24

No, no. It's a massive planning risk. It's the kind of thing that could fundamentally alter what your future actually looks like. And well, it's the exact reality that high net worth couples are facing right now.

SPEAKER_00 0:36

Aaron Ross Powell Which is exactly why we're unpacking this today. We are looking at a really eye-opening guide from Davies Wealth Management.

SPEAKER_01 0:42

Aaron Powell Yeah, they're a fee-based fiduciary advisor down in Stewart, Florida.

SPEAKER_00 0:47

Right. And this research actually ties into themes they talk about on the 1715 Treasure Coast Financial Wellness Podcast. The guide we're looking at is titled Couple Retirement Calculator. Why one number isn't enough.

SPEAKER_01 0:59

It's a great title because it completely reframes how you have to look at the endgame.

SPEAKER_00 1:03

It really does. So our mission for this deep dive is to explore why these generic, free online tools are just so dangerous for couples. I mean, trying to plan a couple's retirement using a single number, it's like it's like trying to choreograph this complex, beautiful duet, but you only give the dancers one single set of footprints to share.

SPEAKER_01 1:24

Oh, I love that duet analogy. It captures the structural flaw perfectly because a mass market calculator, it's built for a median average experience.

SPEAKER_00 1:33

Like a one-size-fits-all thing.

SPEAKER_01 1:34

Exactly. It assumes one retirement date for the whole household, one social security claiming age, a single spending level, and just this very straightforward drawdown of your assets.

SPEAKER_00 1:43

Aaron Powell Which, to be fair, if you have a simpler financial life, maybe $200,000 sage in one 401k, those shortcuts give you a reasonable ballpark.

SPEAKER_01 1:52

Aaron Powell Sure, yeah. But that simplistic math completely shatters when you introduce the complexities of a high net worth life. I mean, you're dealing with deferred compensation plans, staggered retirement dates, maybe multiple pensions.

SPEAKER_00 2:04

Aaron Powell And millions in assets scattered across entirely different tax buckets.

SPEAKER_01 2:09

Aaron Powell Right. Because a couple is not a single entity. They're two distinct human beings.

SPEAKER_00 2:13

Aaron Powell It seems so obvious when you say it out loud.

SPEAKER_01 2:16

Aaron Powell It does. But these calculators basically pretend those two distinct human beings are going to age, stop working, and eventually pass away at the exact same time.

SPEAKER_00 2:24

Aaron Powell Which is wild. So let's break down the biological and you know chronological reality of that, because actuarial data from the Social Security Administration shows this massive longevity asymmetry.

SPEAKER_01 2:36

Yeah, the numbers are pretty stark.

SPEAKER_00 2:37

Right. Like a 65-year-old woman has a median life expectancy near 87. But a 65-year-old man, his median is closer to 84.

SPEAKER_01 2:46

And this is where we really have to force a major perspective shift for anyone listening. If you have a healthy couple sitting across the table at age 65, there is roughly a 50% probability.

SPEAKER_00 2:57

A literal coin flip.

SPEAKER_01 2:58

A literal coin flip that at least one of those partners will live past age 90.

SPEAKER_00 3:02

Okay, let's unpack the math on that for a second. If the actual actuarial data says there's a 50% chance one spouse hits 90, why do so many people in like so many of these algorithmic calculators just stop the projection at age 85?

SPEAKER_01 3:15

It's a huge problem.

SPEAKER_00 3:16

Isn't drawing a hard line at 85 literally building a 50% failure rate right into your life's plan?

SPEAKER_01 3:23

Yes, it is a massive structural error. I mean, people often think using a life expectancy of 85 is being conservative.

SPEAKER_00 3:30

Right, like they're playing it safe.

SPEAKER_01 3:31

Exactly. But it's not. These calculators treat medians as absolute end dates. But a median simply means half of the population dies before that age and the other half lives longer. Okay. Wow. And when you're a high net worth couple, your statistical probability of blowing right past that median is incredibly high.

SPEAKER_00 3:49

Aaron Powell Because of lifestyle factors, I assume.

SPEAKER_01 3:52

Yeah, exactly. You typically have access to better health care, better nutrition, less occupational physical stress, just a healthier overall lifestyle. You are the demographic making up that upper half of the curve.

SPEAKER_00 4:04

Aaron Powell So you really have to plan for a much longer horizon, like stretching to 95 or beyond for at least one spouse.

SPEAKER_01 4:09

Aaron Powell Absolutely.

SPEAKER_00 4:10

So we have this longevity mismatch at the end of life, but we also rarely live in perfect synchronization during our working years, right? Like spouses rarely stop working on the exact same Friday afternoon. Almost never. Right. And this staggered timeline creates this highly volatile window that the guide calls the gap years.

SPEAKER_01 4:30

The gap years are critical.

SPEAKER_00 4:32

So say one spouse retires at 60, but the other plans to keep working until 67. The household income suddenly drops because you lost a salary, but you aren't pulling Social Security to replace it yet.

SPEAKER_01 4:44

Aaron Powell And that drop in income triggers a massive, I mean, golden opportunity for tax planning.

SPEAKER_00 4:50

Aaron Powell Because your bracket drops.

SPEAKER_01 4:51

Exactly. Suddenly your household is sitting in a much lower marginal tax bracket. This is prime territory for Roth conversions.

SPEAKER_00 4:58

Okay, let's walk the listener through the mechanics of that because a rod conversion isn't just, you know, moving money around from one account to another. It's a very specific timed tax play.

SPEAKER_01 5:08

Aaron Powell Right. So you're taking funds from your traditional tax-deferred IRA, which is money that has never been taxed. And you are intentionally moving it over to a Roth IRA. By doing this during these gap years, you pay the income taxes now at this temporarily low rate. And once it's in the Roth, that money and all its future growth is tax-free forever.

SPEAKER_00 5:28

So you're strategically draining your traditional IRA before you hit age 73.

SPEAKER_01 5:33

Yes. Which is when the IRS forces you to start taking required minimum distributions or RMDs.

SPEAKER_00 5:39

Right. Because if you wait until 73 to pull that money out, you might be back in a massive tax bracket.

SPEAKER_01 5:44

Exactly. And the IRS will just force you to withdraw huge sums whether you actually need the money to live on or not.

SPEAKER_00 5:51

Okay. But the gap years sound like a bit of a double-edged sword. Because while you have this amazing tax window, there's a pretty severe trap waiting for you regarding healthcare costs.

SPEAKER_01 6:01

Oh, the healthcare trap is brutal.

SPEAKER_00 6:03

Yeah, the guide notes that if one spouse retires at 60, they have a five-year gap before Medicare kicks in at 65. And pre-Medicare private health insurance for a couple in their early 60s can easily run $2,000 to $3,000 per month.

SPEAKER_01 6:17

Which is, I mean, that's $36,000 a year just in premiums. You cannot just average that out over a 30-year retirement inside a simple calculator.

SPEAKER_00 6:25

It would completely throw off the math.

SPEAKER_01 6:27

Right. It has to be modeled as a separate, severe but temporary spike in your expenses. If your calculator assumes a flat $10,000 a month in expenses for 30 years, it completely misses the fact that you need $13,000 a month during those specific gap years just to keep your health insurance.

SPEAKER_00 6:45

And from what I read, it does not miraculously get simpler once you hit 65 and finally get on Medicare?

SPEAKER_01 6:51

Not at all.

SPEAKER_00 6:52

Because then you run into IRMA, the income-related monthly adjustment amount. I want to spend some time here because the guy paints IRMAA as this vicious financial boomerang.

SPEAKER_01 7:01

Trevor Burrus, Boomerang is the perfect word for it.

SPEAKER_00 7:02

Aaron Powell So my understanding is that IRMAA is essentially a surcharge on your Medicare premiums based on your income.

SPEAKER_01 7:08

Yeah.

SPEAKER_00 7:09

So if we sell a business or trigger a big capital gain in 2024, our household income spikes and Medicare bumps up our premium. Frustrating, sure, but it seems straightforward enough.

SPEAKER_01 7:19

Aaron Ross Powell Well, that's the trap right there. They don't just bump up a single household premium. IRMAA is assessed on your modified adjusted gross income or MGI. Which is what exactly is essentially your gross income plus certain tax exempt items, like municipal bond interest. But the crucial detail, the one that absolutely blindsides high net worth couples, is that the penalty is assessed separately on each spouse.

SPEAKER_00 7:43

Wait, wait. So a single financial decision double penalizes the household.

SPEAKER_01 7:47

Yes. If your household MGI spikes because of a large Roth conversion or selling a property, the government raises the Medicare premium for spouse A and they separately raise it for spouse B. Wow. And because of the two-year look back period, a tax move you make in 2024 doesn't show up in your Medicare premiums until 2026.

SPEAKER_00 8:05

That is insane. So you pay your taxes, you think you navigated the event perfectly, and then two years later, bam.

SPEAKER_01 8:10

Bam. A letter arrives from the Social Security Administration adding thousands of dollars in surcharges to your annual health care costs. A generic calculator assumes standard baseline Medicare premiums forever. It is completely blind to this boomerang effect.

SPEAKER_00 8:25

Which means your static plan is basically a ticking time bomb. So navigating all this brings us to the moment when both spouses have finally stopped working. You're both drawing down accounts and claiming Social Security. But the guide points out that how you set up these income streams right now dictates the financial survival of whoever lives the longest.

SPEAKER_01 8:44

It really is the most critical juncture.

SPEAKER_00 8:46

Yeah, it notes that the difference between the best and worst claiming strategy for a married couple can exceed $100,000 in lifetime benefits.

SPEAKER_01 8:55

That's right. The most vital rule for high network couples is that the higher earner must delay claiming social security until age 70.

SPEAKER_00 9:03

Even though people usually want it sooner.

SPEAKER_01 9:05

Right. But instinct is often to take the money as soon as possible at 62 because, you know, you want to get your money out of the system.

SPEAKER_00 9:12

Sure, that makes sense emotionally.

SPEAKER_01 9:13

It does. But when one spouse passes away, the surviving spouse inherits the larger of the two social security benefits, and the smaller check completely disappears.

SPEAKER_00 9:23

Aaron Powell Oh, I see. So you are essentially buying longevity insurance. By delaying to 70, the higher earner is permanently maximizing that benefit for whichever spouse outlives the other, padding the survivor's income for decades.

SPEAKER_01 9:37

Aaron Powell Exactly. And padding that income is critical because of what happens next. When the first spouse passes away, the household undergoes a brutal financial transition. This is the survivor scenario. Right. You immediately lose that smaller social security check. Depending on how elections were made, you might also lose a pension. So the household income drops, but the most devastating blow is the tax shift.

SPEAKER_00 10:00

I have to admit, reading through the mechanics of this tax shift and the source material, it just felt incredibly unfair. It is. I mean, when one spouse passes away, the essential living expenses do not get cut in half. The property taxes on your home, the electric bill to keep the air conditioning running in Florida, the homeowner's insurance, the landscaping. And they'll stay the same. All of those fixed costs are the exact same for one person as they are for two. Yet the surviving spouse's income drops and their taxes actually go up.

SPEAKER_01 10:28

Aaron Powell Yeah. It's commonly referred to in the industry as the widow's penalty. It basically comes down to tax bracket compression. The surviving spouse goes from filing their taxes as married filing jointly to filing as single.

SPEAKER_00 10:41

Aaron Powell Let's visualize that compression for the listener. How does the math actually trap the surviving spouse?

SPEAKER_01 10:46

Okay. So consider a couple drawing $150,000 in income from their traditional IRAs. Under married filing jointly, that $150,000 is spread across very wide accommodating tax brackets. They might stay entirely within the 12% or 22% brackets.

SPEAKER_00 11:03

Okay, tracking.

SPEAKER_01 11:04

But when the survivor's on their own, let's say they still need to draw $120,000 just to maintain the house and their lifestyle. That $120,000 gets crammed into the much narrower tax brackets of a single filer. Oh wow. Suddenly, a large chunk of that exact same money is being taxed at 24% or even 32%, they are paying a significantly higher marginal tax rate on less total income.

SPEAKER_00 11:26

Which connects perfectly back to why those Roth conversions during the early gap years are the ultimate lifeline.

SPEAKER_01 11:31

They absolutely are. If you did the hard work during those staggered retirement years to build up a massive Roth IRA, you created a bucket of tax-free liquidity.

SPEAKER_00 11:41

They can just pull from that.

SPEAKER_01 11:42

Exactly. The surviving spouse can pull the extra money they need from that Roth without pushing their taxable income into those compressed, punitive, single-filer tax brackets. They avoid the widow's penalty entirely.

SPEAKER_00 11:54

And we also have to factor in, you know, the events leading up to that survivor phase. What happens if there's a prolonged illness before the first spouse passes? The guide flags long-term care costs as a major planning failure if it's not modeled correctly.

SPEAKER_01 12:08

Oh, a long-term care event is the ultimate stress test for a portfolio because it acts as an accelerant to all these other problems we've discussed.

SPEAKER_00 12:15

Oh, so?

SPEAKER_01 12:16

Well, imagine one spouse needs memory care or a skilled nursing facility, which can easily cost $10,000 a month. To pay for that, you might be forced into premature portfolio liquidations. You sell off taxable brokerage assets, which triggers massive capital gains.

SPEAKER_00 12:31

And those capital gains inflate your modified adjusted gross income.

SPEAKER_01 12:34

Exactly. Which then triggers the IRMA surcharges two years later. You are caught in a cascading failure. The long-term care costs drain the portfolio meant to support the surviving spouse's remaining 20 years and the force liquidations to generate a tax bill and Medicare surcharges that just drain it even faster.

SPEAKER_00 12:52

So if relying on a single number to navigate life expectancies, gap years, the IRMAA boomerang, and the widow's penalty is basically a recipe for disaster, how does a high net worth couple actually build a resilient plan?

SPEAKER_01 13:06

Well, the guide argues for a complete mindset shift. You stop looking for one number and you start managing a five-phase framework.

SPEAKER_00 13:13

Breaking retirement down chronologically.

SPEAKER_01 13:15

Right. Because it's the only way to manage all these variables. You cannot use the same strategy at 62 that you use at 82.

SPEAKER_00 13:21

Makes sense. Let's walk through what it actually feels like to pivot through these phases. So phase one is that pre-retirement gap we talked about. One partner is retired, one is still working. The strategy here is heavily offensive.

SPEAKER_01 13:33

Right. Highly offensive. This is your primary window for Roth conversions and tax positioning. You are intentionally absorbing tax hits now while your bracket is relatively low.

SPEAKER_00 13:43

Then you transition into phase two, early retirement. You're both finally retired, but you haven't claimed Social Security yet because you're bridging to age 70. This feels like a super vulnerable phase because you're relying 100% on the portfolio.

SPEAKER_01 13:57

It is. And it requires really careful sequence of returns management. You're bridging your income from your portfolio, carefully selecting which accounts to draw from, you know, taxable, tax-deferred, or tax-free to keep your MGI below those IRMA cliffs while allowing your eventual social security benefit to max out.

SPEAKER_00 14:15

Okay, so then phase three is full retirement. You're both on Social Security, but you haven't hit RMD age yet.

SPEAKER_01 14:20

Right. This is a stabilization phase. You're strictly coordinating your income streams to manage IRMAA thresholds and preparing the portfolio for the force distributions that are coming.

SPEAKER_00 14:30

Aaron Powell Which brings us to phase four, the RMD phase. You hit age 73 and the IRS steps in and says, hey, we want our tax revenue now. And because of age gaps between spouses, this gets complicated fast.

SPEAKER_01 14:42

Very fast. One spouse might hit 73 three or four years before the other. So you are managing staggered tax brackets. You have forced income from one spouse's traditional IRA while the other spouse's IRA is still untouched.

SPEAKER_00 14:55

So you're just constantly balancing the tax load.

SPEAKER_01 14:57

Exactly.

SPEAKER_00 14:58

And finally, phase five, the survivor phase. The duet becomes a solo. You're managing reduced income, single filer tax treatment, and ensuring maximum longevity protection so they never run out of money.

SPEAKER_01 15:09

Yep.

SPEAKER_00 15:09

And wrapping around all five of these phases is the massive shadow of estate planning. The guide brings up something called the One Big Beautiful Bill Act, which permanently set the federal estate exemption to $15 million per individual or $30 million per couple.

SPEAKER_01 15:25

And that permanency provides massive strategic certainty. For years, financial planners and estate attorneys were constantly trying to guess if the estate tax exemptions were going to sunset and drop back down to $5 million.

SPEAKER_00 15:35

Aaron Powell Right, which forced a lot of rush decisions. Trevor Burrus, Jr.

SPEAKER_01 15:38

So much manufactured urgency. But now that $30 million for a couple is permanent, high net worth families can be deliberate.

SPEAKER_00 15:45

Aaron Powell So with that breathing room, what should they be focusing on instead of just the federal estate tax?

SPEAKER_01 15:50

Aaron Powell Well, they can focus on state level estate taxes, which is crucial if they split their time between a tax-friendly state like Florida and a high-tax state up north.

SPEAKER_00 15:59

Oh, yeah, that makes sense.

SPEAKER_01 16:01

They can also take their time designing multi-generational trust structures, you know, to protect assets from heirs, creditors, or divorces. And most importantly, they can optimize for the step up and basis.

SPEAKER_00 16:12

Aaron Powell Okay, for the listener who isn't familiar, a step-up and basis is an incredibly powerful tax provision. If you buy a stock for $100,000 and it grows to $1 million, you have $900,000 of taxable gain.

SPEAKER_01 16:24

Right.

SPEAKER_00 16:25

But if you pass away and leave that stock to your children, the IRS revalues that asset at the current market price of $1 million. If your kids sell it the next day, they pay zero capital gains tax on those decades of growth.

SPEAKER_01 16:37

It is arguably the most powerful wealth transfer tool in the tax code. But, and this is a big bet, you only get it if you hold the right assets in the right type of accounts at the time of death.

SPEAKER_00 16:49

Which requires relentless coordination between your tax phases and your estate plan.

SPEAKER_01 16:53

Exactly.

SPEAKER_00 16:54

Which leads perfectly into mistake number five in the guide, assuming the plan is finished. A static plan goes dangerously stale after a major life event or a change in tax law. You can't just plug these five phases into a spreadsheet in 2024 and put it in a drawer until 2044.

SPEAKER_01 17:09

No, a static formula cannot adapt. This is exactly why the transition from a standard calculator to a fiduciary advisor is so necessary for high net worth couples. You need dynamic modeling. Instead of assuming a flat 6% return every year, an advisor uses Monte Carlo simulations.

SPEAKER_00 17:26

I am so glad you brought that up because Monte Carlo gets thrown around a lot as industry jargon. How does that actually protect a portfolio better than a static math formula?

SPEAKER_01 17:35

Well, a standard calculator assumes you get a smooth average return every single year, but the real stock market is chaotic, right? Yeah. A Monte Carlo simulation runs thousands of randomized market scenarios. It tests what happens if the market crashes in year one of your retirement versus year ten. It tests what happens if inflation spikes right as you hit the gap years.

SPEAKER_00 17:56

Go wow.

SPEAKER_01 17:57

Yeah. It actively stress tests that survivor scenario under the worst case conditions, like the early death of the higher earner during a bear market. It doesn't give you one number, it gives you a probability of success across thousands of alternate realities.

SPEAKER_00 18:11

It's applying actual human judgment and advanced stress testing to your specific, nuanced situation. An algorithm just cannot replicate that level of multivariable optimization.

SPEAKER_01 18:22

Not even close.

SPEAKER_00 18:23

And as a reminder, all of the insights we've unpacked today come from the team at Davies Wealth Management. They've been serving clients since 1996, and they've been based in Stewart, Florida since 2021. Their focus is specifically on working with executives, business owners, and professional athletes.

SPEAKER_01 18:39

Basically, people who require this exact level of sophisticated tax integration and estate coordination. It's exactly if you want to get a clear, immediate picture of where your own plan stands, check out the financial wellness quiz mentioned in their guide. It takes just a few minutes and gives you a personalized starting point to see if you actually prepared for all five phases.

SPEAKER_00 19:00

Yeah, taking that quiz is a fantastic first step to breaking free from the single number mindset.

SPEAKER_01 19:05

We have covered a massive amount of ground today, from actuarial coin flips and the IRMA boomerang to the widow's penalty and the power of a step up in basis. But before we wrap up, I want to leave you with one final thought to mull over, and it goes beyond the spreadsheets.

SPEAKER_00 19:21

Oh, this is important.

SPEAKER_01 19:22

The source material focuses heavily on the intense financial math of the survivor phase, you know, the bracket compression, the RMD sequencing, the healthcare surcharges. But consider the profound psychological burden behind those numbers. Yeah. In almost every couple, one spouse naturally takes on the role of the financial manager. They track the accounts, they talk to the CPA, they execute the drugs.

SPEAKER_00 19:43

Usually it falls on one person, yeah. And if that spouse passes away first, the surviving spouse isn't just dealing with the grief of losing their partner. They might face 20 years living entirely alone in their 80s or 90s. And at an age where cognitive decline is a very real statistical risk, they are suddenly thrust into the driver's seat.

SPEAKER_01 20:01

Right. They're forced to navigate this incredibly hostile maze of solo tax brackets, multi-year IRMAA lookbacks, and phased portfolio drawdowns.

SPEAKER_00 20:12

Exactly. Perhaps the ultimate value of building this rigorous multi phased fiduciary plan today isn't just about maximizing your dollars or beating the IRS. It's about protecting your spouse from having to become a reluctant tax expert in the final decades of their life.

SPEAKER_01 20:27

That's beautifully said.

SPEAKER_00 20:28

You are doing the hard work to choreograph this complex duet so beautifully today that when your partner eventually has to dance alone, they already know every single step.