Retirement Planning for Couples with an Age Gap

Picture this: Sarah's 58, her partner Mark is 65. He's ready to retire and start collecting NZ Super. She's got seven more years until she can access her own government support. They've been saving together, planning together, but suddenly they're facing a question they didn't fully anticipate: how do they make retirement work when they're at completely different life stages?

If you're in an age gap relationship (whether it's five years or fifteen), you're not alone in grappling with this. The age difference that's barely mattered in your daily life suddenly becomes a major planning factor when retirement enters the picture.

Here's the fundamental thing to understand: NZ Super is an individual entitlement. You qualify at 65 based on your own age and residency, not your partner's situation.

What does this mean in practice? When the older partner reaches 65, they'll start receiving NZ Super. The younger partner gets nothing until they also turn 65, regardless of whether they're married, in a civil union, or in a de facto relationship.

The payment rates do depend on your relationship status, though. A single person living alone gets more than someone who's partnered (because the government assumes you're sharing living costs). In 2024, a single person receives around $542 per week after tax, while each person in a couple gets about $415 per week.

This creates an interesting situation during those gap years. When only one of you qualifies, they'll receive the "married rate" even though your household doesn't have two NZ Super incomes coming in yet.

Let's be honest, this is where age gap couples face the trickiest retirement planning challenge. For however many years separate you, your household will be in a transitional phase where retirement income doesn't quite match retirement expenses.

Say there's an eight-year age difference. That's potentially eight years where your household income drops significantly if the older partner stops working completely. Eight years where you're trying to maintain your lifestyle on one NZ Super payment, whatever the younger partner earns, and any savings you draw down.

Common scenarios during the gap period:

• The younger partner continues working full-time while the older partner retires (most common approach)
• The older partner does part-time or consulting work to supplement their NZ Super until the younger partner qualifies
• Both partners shift to part-time work, creating a semi-retirement phase for both
• You draw more heavily from savings and investments to bridge the income gap

There's no single right answer here. The approach that works depends on your jobs, your health, your financial position, and frankly, how much you both still enjoy working.

Here's something that confuses a lot of couples: your KiwiSaver withdrawal timing is completely independent. Just because your partner withdrew their KiwiSaver at 65 doesn't mean yours is locked away until then.

You can both access your respective KiwiSaver funds when each of you turns 65 (or meets the five-year membership requirement). This gives you some flexibility in how you manage the income gap period.

Some couples consider these approaches:

• Staggered withdrawals: The older partner withdraws their KiwiSaver at 65, while the younger partner leaves theirs invested longer for additional growth
• Lump sum timing: Taking the older partner's KiwiSaver as a lump sum to pay off the mortgage or fund renovations, reducing ongoing expenses for both
• Phased drawdown: Both partners leaving KiwiSaver funds invested and drawing regular amounts as needed, rather than full withdrawal

Remember, once you withdraw from KiwiSaver, you can't put it back. The decision isn't just about when, but how much and for what purpose. For more on managing these funds alongside other savings, you might find our guide on building a diversified retirement portfolio helpful.

This is something age gap couples often overlook until tax time rolls around. When one partner has significantly more income than the other, you might be paying more tax than necessary as a household.

New Zealand taxes individuals, not couples. You can't file jointly or split income the way some countries allow. However, there are still some strategies worth considering during your gap years:

Investment income allocation: If you have investments outside KiwiSaver, consider whose name they're held in. Having investment income flow to the lower-earning partner can keep both of you in lower tax brackets.

PIE fund advantages: If you're using Portfolio Investment Entities, the tax rate is based on your prescribed investor rate (PIR), which is capped at 28%. This can be beneficial if the working partner is in the 33% or 39% tax bracket.

Timing of withdrawals: If you're drawing down savings, think about which partner makes withdrawals from taxable accounts. Sometimes it makes sense for the partner with lower other income to realize capital gains or take distributions.

For a deeper dive into how different investment structures affect your tax situation, check out our comparison of PIE funds versus regular funds.

The most successful age gap retirement plans acknowledge that you're dealing with two different timelines that need to work together.

Start by mapping out the key dates:

• When does each partner turn 65?
• When does each partner's KiwiSaver become accessible?
• When do you want to stop working full-time (which might be different from when you can)?
• When does your mortgage get paid off?
• Are there any other age-related milestones (like when kids finish university)?

Then work backwards from those dates. If there's a ten-year gap between your 65th birthdays, what does year one look like? Year five? Year ten?

Questions to discuss together:

• Can we maintain our lifestyle when one partner's income drops or stops?
• How much do we need to save additionally to cover the gap period?
• Would we rather both work part-time, or have one partner fully retire?
• Do we need to adjust our retirement age expectations to match financial reality?
• How will we handle major expenses (like travel or home renovations) during the transition period?

This isn't a one-time conversation. Your circumstances will change, the economy will shift, and you'll both evolve in how you think about work and retirement. Plan to revisit this annually.

Let's talk about something that doesn't fit neatly into spreadsheets: the emotional complexity of being at different life stages.

The partner who reaches 65 first might feel guilty about retiring while their younger partner keeps working. Or they might feel entitled to retire and frustrated if financial constraints mean they need to keep working.

The younger partner might feel resentful about being the primary earner during the gap years. Or they might feel pressure to keep working when they'd rather cut back too.

These feelings are normal. Age gap couples navigate different life stages throughout their relationship, this is just another version of that. The key is talking about it openly, early, and often.

Some couples find it helpful to reframe this as "our retirement" rather than thinking of them separately. Yes, you hit the milestones at different times, but you're building toward a shared future. That might mean the older partner continues working in some capacity. It might mean both of you shift to part-time work during the gap years. It might mean the younger partner carries more of the financial load for a period, but you're both contributing what you can.

Here's something that catches age gap couples off guard: your healthcare needs and costs will likely diverge as you age.

The older partner may need more medical care, prescription medications, or even aged care services while the younger partner is still relatively healthy. New Zealand's public health system provides good basic coverage, but many people face out-of-pocket costs for specialists, dental care, or private treatment to avoid wait times.

If you currently have private health insurance through employment, what happens when one partner retires? Individual health insurance gets more expensive as you age, and it might not cover pre-existing conditions if you're taking out a new policy later in life.

Healthcare planning considerations:

• Keep the younger partner's employer health insurance for as long as possible if it covers both of you
• Budget separately for each partner's likely health expenses based on their age and health status
• Consider whether private health insurance makes sense for the older partner to bridge the gap until the younger partner also retires
• Factor in that the older partner might need aged care services before the younger partner is ready to retire

This is another area where having an age gap means your planning needs to be more nuanced than it would be for same-age couples.

This isn't pleasant to think about, but it's important: when there's an age gap, there's a higher likelihood that one partner will spend years as a widow or widower.

Your retirement planning needs to account for what happens if the older partner passes away first. Will the younger partner have enough to live on? They'll lose one NZ Super payment but won't necessarily reduce their living costs by half.

Things to put in place:

• Life insurance: Particularly on the older partner, to provide income replacement if they pass away before the younger partner reaches 65
• Clear wills: Make sure you've both updated your wills and that they reflect your wishes for how assets should pass
• Enduring Power of Attorney: Both financial and health-related, so each partner can make decisions if the other becomes incapacitated
• Superannuation beneficiary nominations: Make sure any KiwiSaver or other retirement funds have current beneficiary designations

The younger partner also needs to think about their own very long retirement. If there's a significant age gap, they might spend twenty or even thirty years retired after their partner passes away. That's a long time to make retirement savings last.

This article is general information only and does not constitute personalised financial advice. For advice tailored to your situation, speak with a licensed Financial Advice Provider. You can find a registered adviser at fma.govt.nz.