There appears to be an ever widening gap between what married and single households are able to save. What are some of the factors that may contribute to this divide and can anything be done to potentially minimize the gap?
Married Versus Single Household Savings
On one side of the divide, married households typically make more money overall, but may have more overall expenses as well. On the other side, single households don’t have the benefit of a double income or sharing expenses, also known as “economies of scale,” with a spouse.
Divorce may be one reason for the expanding marital gap in finances. In divorce, assets are divided and legal expenses can be a tremendous drain on savings. Also, if children are involved, the impact of having two separate residences and child support can be overwhelming. According to an online survey, divorced workers (who are typically 5 years-plus older than un-divorced counterparts) on average have $113,000 saved for retirement while married workers have $124,000 saved for retirement.1
Another possible reason for the marital gap in savings may be the death or illness of a spouse. An unexpected loss could cause a severe drain on current and future resources, especially if applicable insurance coverage wasn’t in place to minimize medical expenses or to offset the loss of a spouse’s future earnings.
In addition to maximizing household income and protecting oneself and loved ones with appropriate and manageable insurance coverage, there are a number of steps you can take with the guidance of a financial advisor to better provide in the face of future financial uncertainties:2
- Increase employer retirement plan participation;
- Boost overall savings & ability to save;
- Improve feelings of confidence and control;
- Step-up formal planning and calculate future needs; and
- Maximize general financial management and financial health.
Bottom line, regardless of marital status, both married and single households can benefit by taking simple steps to ensure they will be prepared for uncertainties—whether disability, illness or death of a spouse, divorce, college spending, or any event that includes loss of income or loss of assets. A savings plan is the first line of defense in protecting your ability to provide and prosper, and considering narrowing the marital gap with the help of a trusted financial advisor.