Estate Planning for Cougars and Sugar Daddies

Couples with age differences of ten years or more should consider reviewing and implementing estate and retirement planning techniques unique to their situation. These large age gap relationships can result in a financial benefit by allowing the couple to save more in their qualified retirement plans, defer Social Security for as long as possible, and use life insurance to protect the future needs of the younger spouse.  

Qualified Retirement Plans: Qualified retirement plans like 401(k)s or IRAs require retirees to begin taking minimum distributions at age 70 1/2. The required distribution is located in a series of tables published by the IRS each year. For couples with an age difference of ten years or more, a separate table provides a smaller distribution requirement, reducing the recipient’s annual taxable income. 

Social Security: Couples with large age gaps should consider having the older spouse defer Social Security payments for as long as possible—preferably to age 70 if possible—to allow the younger spouse to collect spousal or survivor benefits for as long as possible. Additionally, deferring Social Security payments can reduce the stress and anxiety of outliving available money as the couple will receive higher payments. 

Pension Maximization: Couples with a large age gap can also engage in pension maximization. This strategy involves the older spouse opting for a single life pension option which provides higher annual payments. However, the single life pension option only pays as long as the pensioner is alive. Under this strategy, the couple uses the extra income from the single life option to fund a life insurance policy on the older spouse that will allow the younger spouse to later fund his or her retirement needs. 

See Robert Laura, Retirement Strategies For Sugar Daddies and Cougars, Forbes, Feb. 24, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.