Since just about half of private sector workplaces in the U.S. offer some type of retirement plan, many employees in dual income houses could be failing to account for enough savings for both themselves and their spouses, according to new research by Boston College’s Center for Retirement Research.

As a result, the employee with a workplace retirement plan should be saving more to make up for their spouse’s lack of a plan. Unfortunately, the report found, savings vehicles like U.S.-based 401(k) plans don’t often have design features that account for overall household income.

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By comparing single-earners in couples and dual-earner households where either one or both spouses are saving through a workplace plan, the research found all three groups save about the same amount —between eight and nine per cent. In fact, the lowest (8.4 per cent) rate of savings was among earners in dual-income households where just one earner has a workplace retirement plan. “These individual savers don’t seem to realize they need to pick up the slack for their spouse,” noted the report.

The problem is magnified when the amount employees save into their workplace plan is compared to their overall household income. While a household with two earners who are both saving into 401(k) plans is putting away about 9.8 per cent of their household income, where just one earner is saving, this drops to 4.9 per cent.

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“This result is discouraging because these households should have a leg up for saving for retirement; after all, they have two earners and access to a 401(k) — two characteristics that should make it easier to save,” noted the report.

It suggested that plan design should take this trend into account by implementing auto-escalation features, as well as considering a person’s marital status when setting default contribution rates and introducing further education.

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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