Two-Earner Households Are Sometimes Less Prepared for Retirement

With regard to household incomes and the economy in general, we often hear the opinion that “it takes two incomes these days”. And in many situations, that is indeed true. Ironically, some statistics suggest that while dual-earner households might be making more money overall, they are often less prepared for retirement!

Data from the Survey of Income and Program Participation (SIPP) highlights the problem. The survey tracked three types of couples: One-income households with one person saving for retirement, dual earners where both parties were saving for retirement, and dual earners where only one spouse was saving for retirement. Overall household contribution rates were as follows:

• One-earner households with one person saving: 8.6 percent
• Dual-earner households with both spouses saving: 9.3 percent
• Dual-earner households with one spouse saving: 4.9 percent

Clearly, when both spouses are working and saving, the numbers look promising. The problem is that when only one working spouse is saving for retirement, a relatively low percentage of the annual household income is being set aside for the future. It’s not that the one saver isn’t saving enough; just that they often haven’t considered the fact that they need to save even more than usual to make up for their spouse’s lack of savings.

This can be a problem when retirement arrives, and the couple must endure a significant lifestyle change due to the lack of savings!

So what is the problem? Most likely, it boils down to lack of access. Only about half of working Americans have access to an employer-provided 401(k), so that leaves a lot of dual-earning couples with only one retirement savings vehicle at their disposal.

What can they do about it? First, dual earning couples should consider their overall household income and lifestyle expenses, and decide whether they are actually saving enough to maintain that lifestyle in retirement. The spouse with access to an employer-provided account might need to bump up their savings rate.

Other options include sound Social Security planning. When you plan for your Social Security benefits years in advance, you can take advantage of opportunities to increase your benefits. We can help with that part. Remember to consult with us regularly as you plan for retirement, and we can help you and your spouse devise ways to maximize Social Security as a part of your overall retirement income plan.