The gap year problem
When one partner retires years before the other, the household is neither fully working nor fully retired. Most calculators cannot express that, and the error runs in an optimistic direction.
Say you plan to retire at 62 and your spouse, four years younger, plans to keep working until 65. For seven years the household is in a strange state: one salary still coming in, one person drawing down, and a set of accounts that belong to different people with different rules.
Most retirement calculators cannot describe that period at all. They ask for a retirement age, put every account in one pile, and switch the whole household from “saving” to “spending” on a single date.
Why one pile is wrong
The problem is not precision, it is direction. Collapsing the household into one portfolio makes two errors that both flatter the plan:
- It lets the plan spend money it cannot reach. Your spouse’s 401(k) is not available to fund your spending at 62 without penalty. A single pooled balance quietly assumes it is.
- It stops contributions too early. Your spouse is still working and still contributing for another seven years. Ending all contributions at the first retirement throws away seven years of deferrals and match.
Net of the two, the pooled model tends to look more achievable than the real thing in the early gap years and then run short later.
Accounts carry their own rules
The fix is to stop treating money as four buckets (pre-tax, Roth, taxable, HSA) and start treating it as pools that belong to someone. Each pool carries the rules that govern it: who may draw from it, until when it receives contributions, and which RMD clock it is on.
During the gap, then:
- The plan draws only from pools belonging to whoever has actually retired.
- It keeps contributing to the still-working partner’s accounts.
- Jointly held money is drawable from the first retirement but keeps receiving contributions until the last one.
That last rule is the one that looks inconsistent and is not. A joint brokerage account genuinely is spendable the day either of you stops working, and it genuinely does keep growing from the salary that is still arriving.
The safety property
There is an obvious risk in adding this machinery: that it changes the answer for the millions of households it should not apply to. A single person has no gap year, and their projection must come out exactly as it did before.
So pools whose rules match get merged before the projection runs. A single-owner household collapses to one pool and produces bit-for-bit the same numbers as the old four-bucket model. The staggered logic only ever engages when there is actually a stagger to model.
One number to watch. In a staggered household, “when do I retire” and “when does the plan start drawing down” are different dates. A shortfall warning that measures against total spending rather than the portion actually funded by the portfolio will report a phantom shortfall in every gap year, when a salary is covering it perfectly well.
What to do with this
If you are modelling a couple with an age gap, the two inputs worth being deliberate about are the spouse’s retirement age and the spouse’s Social Security claim age. Both default to something reasonable, and neither default is right for everybody. The gap years are where a plan is most fragile and where the assumptions are least visible. That is a bad combination to leave on autopilot.