Married Couples Lose an Average $14,000 in Retirement by Skipping One Conversation

A Boston College Center for Retirement Research (CRR) brief found that one in five married couples miss out on an opportunity to add around $14,000 in retirement wealth. The reason isn't picking the wrong investment or retirement plan type.

Surprisingly, it's a lack of communication around which spouse's workplace plan they should prioritize. The good news is that you don't have to make the same mistake. Learn what's not being said and how you could fix this error in your own household.

How much couples lose by not talking

The CRR brief revealed that when couples don't coordinate their workplace retirement contributions, they don't get the full value of employer matching available to them. For some couples, this leads to the $14,000 loss mentioned earlier, but that's just an average across married couples in the study. By age 65, some couples could realize losses of $40,000 or more.

This larger number is at about the 90th percentile for this report, but it's impactful nonetheless. It demonstrates how a small failure to communicate could lead to tens of thousands of dollars less in the nest egg. It's money that most retirees would surely miss.

The retirement choice they don't make

So, couples don't talk, but what exactly aren't they talking about? It comes down to employer match formulas, which vary by workplace. Consider these two scenarios:

• One spouse's employer matches dollar-for-dollar up to 3%
• The other spouse's employer matches 50 cents for every dollar up to 6%

The couple would get more free money by maxing out the dollar-for-dollar plan first. By thinking of the two separate accounts as one shared opportunity, they are able to coordinate accounts as a single choice.

The long-term impact of not working together

Couples who contribute to the wrong retirement account first or in the wrong proportion lose out on an average of $757 a year in match money, or a median of $383.

It's around 13% of their total yearly retirement contributions. This is also money they didn't have to work additional hours to earn; it was coming to them from their employer as part of their benefits package.

The most important takeaway is the impact of money that isn't there, so it can't have compounding growth. The $757 a year may not seem like much until it builds upon itself through investment growth until about age 65. That's where you get the big losses of $14,000 mentioned in the research.

Don't leave benefits on the table

It's easy to forget that employer match is part of the value of your paycheck. It's best understood as part of your total compensation, and not an optional perk on the side. The Bureau of Labor Statistics (BLS) says benefits are a significant share of what employers pay for labor, so leaving match dollars unclaimed prevents you from getting the full value of your labor.

When you coordinate contributions, you boost retirement savings and collect more of the compensation your employers have already set aside for you.

Why couples miss this money

The Boston College research doesn't blame the problem on confusion or lack of motivation around investing. Instead, it suggests couples never thought about coordinating benefits to begin with.

Other couples may hesitate because they don't know how divorce laws work or they assume that they would lose the money they put into a spouse's account. But in many cases, retirement assets accumulated during a marriage are treated as marital property and are divided independently of who made the contributions. (State laws may vary.)

Married couples who think of money as "mine versus yours" may take the wrong approach. It's teamwork that gets couples thinking about how to get the most free employer cash for their nest egg.

What couples should do next

If you and your spouse have an employer-sponsored retirement plan, it's time to take action. Sit down together when you're both open to discussing finances and your future. Be sure you each have all the latest information about your respective employer plans, including:

• Match rate
• Match cap
• Vesting rules
• Salary percentage

Then, direct contributions first to the plan with the higher employer match, and send any remaining savings to the other spouse's plan.

Bottom line

Even if you don't regularly talk about finances, or it makes you uncomfortable, this is one conversation worth pushing through. A single planning session could help couples recover hundreds of dollars a year, adding up to thousands over time.

Just be sure to review this plan any time one spouse changes jobs, gets a raise, or gains access to a new plan. You want to continue to make the right moves, and it's often easier to talk about it after you've had one successful session behind you.

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