Why Couples Should Coordinate Their 401(k)s to Build More Retirement Wealth
Why Couples Should Coordinate Their 401(k)s to Build More Retirement Wealth
When it comes to planning for retirement, most couples can agree to save as much as possible. But when each spouse focuses on their own 401(k), without thinking much about how the two plans work together, they could miss out on valuable employer matching money. Here’s why coordinating 401(k) plans matters.
The Hidden Cost of Saving Separately
When each spouse has a workplace 401(k), the two plans likely aren’t identical. For instance, one employer might match 100% of your first 4% of contributions. Another employer might match 50% of the first 6%. Those differences might sound small, but they add up fast.
Research suggests that couples who don’t pay attention to the difference in company matches could miss out on roughly $14,000 in retirement savings over their lifetime.
Free Money You Don’t Want to Leave on the Table
Employer matching contributions are one of the best benefits a job can offer. When you contribute to your retirement account, your employer adds money to that account. That’s as close to free money as it gets.
But to take full advantage, you need to know the rules of each plan. And then you need to decide together where contributions should go first.
Say your employer matches 100% on the first 3% of your salary. Your spouse’s employer matches 50% on the first 4%. The smart move is to make sure the spouse with the 100% match contributes enough to capture the full benefit. After that, shift focus to the other plan.
This kind of adjustment just requires being intentional about where the money goes.
The Real Problem Usually Comes Down to Communication
How many couples sit down together and ask, “Which of our 401(k)s gives us the better deal?” Each person typically handles their own benefit enrollment, their own contribution rate, and their own plan. Often, the two 401(k)s are never really compared.
Over time, one spouse might be leaving employer-matched money unclaimed while the other might be over-contributing to a plan with a weaker match. The key is to look at the full picture together.
Make It a Habit
The communication fix? Set aside time a couple of times a year to review finances and retirement accounts together. Call it a money date or a finance check-in, whatever makes it feel approachable and not like a chore. It doesn’t need to be complicated or stressful.
Here are the basics to cover:
- What are each of our current contribution rates?
- Are we both getting the full employer match?
- Has anything changed? A new job, a salary increase, updated benefits?
- Do our contributions still match our goals?
If there’s one thing to depend on in life, it’s change. A new job might come with a better 401(k) match. A raise might make it easier to increase contributions. These life changes are worth catching early so you can adjust your strategy while it makes the biggest difference.
Retirement planning is about making sure every dollar is working effectively toward your goals. And the employer match is one of the easiest ways to get more out of what you’re already contributing.
About the Author
Subscribe to Our Newsletter
Related Articles
What Taxpayers Need to Know About the New IRS Penalty Relief Program
Missed a filing or payment deadline? The IRS just rolled out a new program that can automatically waive certain penalties without you ever having to ask. Find out who qualifies, which penalties are covered, and what to do if a notice still slips through the cracks.
How Deferred Compensation Plans Work and When They Make Sense for Retirement
Already maxing out your 401(k) but want to save more for retirement? Deferred compensation plans offer no contribution limit and real tax advantages, but they come with tradeoffs that make them a smart move for some and a risky one for others.
Is a Roth Conversion Right for You? Benefits, Risks, and Tax Strategies
Key Takeaways: Converting a traditional IRA or 401(k) to a Roth account triggers taxable income in the year of conversion, but qualified withdrawals afterward are tax-free. The strategy works best when you convert during a lower-income window, such as early retirement...
