Retirement Blog

Finance Blogs » Retirement » No break for 2-earner couples

No break for 2-earner couples

By Jennie L. Phipps · Bankrate.com
Wednesday, July 24, 2013
Posted: 11 am ET

If both halves of a couple work, when they retire, Social Security will replace a smaller percentage of their total income than it would for a couple in which one spouse works and the other isn't in the workforce.

This finding by a research team from the Center for Retirement Research at Boston College offers yet another reason why couples saving for a future retirement can't depend as heavily on Social Security as older couples have been able to do.

When I first read this premise, it sounded wrong. After all, when both halves of a couple are employed, they bring home more money and pay more into Social Security. Shouldn't that mean that they get more?

Yes -- and no.

According to the center's calculations, a couple accustomed to living on a $57,000-a-year, one-earner paycheck would currently be able to collect 60 percent of their pre-retirement income from Social Security when they retire. If they both worked and together they earned more than that wage, their combined Social Security income would replace a lower percentage of their pre-retirement income, with the magnitude of the decline dependent on how much more they earned. If both halves of the couple were high earners and they each made $57,000, then at retirement, Social Security would replace only 40 percent of their previous joint earnings.

April Wu, the center's research economist, puts it simply: "If you are dependent on two incomes, you can't rely as heavily on Social Security."

Because later generations -- late boomers, Gen Xers and those still younger -- are more likely to be two-earner couples, "Our conclusion is that a lot of them will have to rely increasingly on other forms of retirement," Wu says.

The retirement planning bottom line: keep saving.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
4 Comments
Toby Speed
July 26, 2013 at 9:32 am

Thank you, Reed, for that explanation.

Reed
July 24, 2013 at 2:41 pm

Article should have included why this happens, maybe with some math.

(I'll use H & W to indicate spouses) Based on $57K avg incomes,

First H gets $22800 SS benefit, W gets 50% "spousal" benefit = $11400 (Total $34200 = 60% of $57000 total income)

Second H gets $22800, W gets own $22800 benefit (Total $45600 = 40% of $114000 total income)

Net effect is 2nd couple gets more total $$ as SS benefit, but smaller % of pre-retirement "total" income

One of the many quirks of the SS system :-)