Dual-income couples tend to make a major mistake that jeopardizes their retirement

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Saving for a retirement as a couple may seem easier if both people are bringing home a paycheck.
But many dual-income couples aren’t taking advantage of tax-deferred retirement accounts, such as 401(k)s, according to data reported in an article on MarketWatch.
When only one spouse is contributing to a 401(k), their savings rate is just 5% of total household earnings.
Only about half of private sector workers have access to a workplace retirement plan, but experts say those who do should be maxing it out.

In dual-earning households, two paychecks doesn’t always equal twice as much savings — and it could spell trouble for retirement.

In a recent opinion article published on MarketWatch, Alicia H. Munnell, the director of the Center for Retirement Research at Boston College, writes that "two-earner couples are in the worst shape" for retirement.

Couples where both partners work often need a bigger retirement nest egg to sustain their lifestyle, Munnell said, but too many are not planning accordingly.

A new study using data from the Survey of Income and Program Participation reveals that in dual-income couples between ages 25 and 54 who contribute to a 401(k) or other workplace retirement plan, the task of contributing is often relegated to one spouse, Munnell writes. But even then, the spouse isn’t saving enough.

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While only about half of private sector workers have access to a workplace retirement plan — and there are ways to save for retirement outside of one — the data still show that couples "do not seem to realize that they need to pick up the slack if their spouse is working but not saving," Munnell wrote.

The study looked only at married couples who save in a workplace retirement plan. Dual-income couples with one person contributing to a 401(k) are saving just 5% of their total household earnings. Couples with two savers are doing somewhat better, contributing 9.3% of their total household income to a 401(k), but it’s still "relatively little," Munnell wrote.

Experts agree that one of the easiest and most beneficial strategies for saving for retirement is maxing out a 401(k) or individual retirement account (IRA) — the tax advantages are often unparalleled. In 2019, you can elect to contribute a percentage or dollar amount of your pretax salary to a 401(k) if your company offers it, up to $19,000, or $25,000 if you’re over 50.

Not only do the pretax dollars funneled into a 401(k) grow exponentially, they reduce the contributor’s taxable income by that amount. Plus, some companies offer to match contributions up to a certain percentage of the employee’s.

The study did not look at non-retirement savings accounts held by the couples. IRAs, which anyone can open and contribute to, are also funded with pretax dollars, but their thresholds are much lower — $6,000 for 2019, or $7,000 if you’re over 50 — so it limits what a spouse without access to a 401(k) can do when it comes to maximizing savings.

As Munnell puts it, in dual-income couples where one person doesn’t have access to a 401(k), "the spouse with a plan should save more to make up for the non-saving spouse."

More and more companies are beginning to auto-enroll employees in their 401(k) plans and setting a default contribution rate. However, the default rate tends to be low, so financial experts suggest reviewing it on your own to figure out how much you should really be saving, and to ensure you’re scoring that employer match.

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