Living in a two-salary household should provide stability and financial security, right?
Not necessarily, says a new report from the Center for Retirement Research at Boston College, which draws some surprising conclusions about women, money and financial choices.
Despite higher household income, married women in two-salary families are actually at the greatest financial risk in retirement.
The report found that married women have the highest probability of being unable to sustain their lifestyle in retirement, according to Kerry Hannon at NextAvenue, who wrote about the report findings.
Married women in dual-income families are more at risk than single women or married women in one-salary households.
The results seem counterintuitive. You would think that two-income households should be better prepared for retirement, since they have more annual income and more emergency backup should one partner lose their job.
But it doesn’t work out that way, say researchers. Here’s why.
Two-income households make more money and spend more money. But what they don’t do is save more money.
Researchers say that extra salary is paying for a nicer car, a bigger house, and a comfier lifestyle. What it isn’t doing is finding its way into a savings or investment account.
It’s not uncommon for only one partner in the two salary household to contribute to a 401(k) or retirement account. The second person is often not saving, meaning that instead of saving the 10% to 15% of income financial planners recommend, these households are putting away only 5% or so. You can do the math. Spending more and saving less can be a recipe for disaster.
Why isn’t the extra income making its way to a retirement account? It seems the women in these couples are making other close-to-the-heart choices about how to spend their money. Women have a preference for putting others ahead of themselves, so they’re taking care of aging parents, needy adult children, and busy spouses, and are often neglecting to spend time – and money – on themselves.
That decision can leave them, and their partner, short of funds when it’s time for retirement.
The bottom line: Assuming someone else – even a spouse – will save and invest for you leaves you exposed and vulnerable. It’s time to sit down with your family and have that important talk about your financial future. You may also wish to involve a financial advisor who understands your needs. Ask her what you should be saving and doing now to bullet-proof your retirement. If you have two working incomes in your family, make sure you are using that extra money to make you financially stronger and better prepared for the future.
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