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.