One in five couples forfeit retirement matches due to coordination failures

A study by the Center for Retirement Research indicates that approximately one in five couples fail to coordinate their employer-sponsored retirement plan contributions, resulting in an average annual loss of $757 in matching funds. Researchers analysed regulatory filings and tax data for roughly 185,000 couples, finding that this lack of coordination reduces retirement wealth at age 65 by an average of $14,000. The findings suggest that misunderstandings regarding asset division in divorce and a failure to view household finances holistically contribute to the issue.

The research highlights that couples could increase their annual income by an average of $757 simply by moving savings from the account with the less generous dollar-for-dollar match to the more beneficial one. Despite the clear financial benefit, an accompanying survey found that nearly half of respondents who did not maximise a match benefit were unaware they had done so. More than a third of respondents where both spouses have a retirement plan had not considered that coordination could result in more money.

The study suggests that the strength of a couples’ marital commitment may play a role in these financial decisions. Couples who ended up getting divorced were more likely to have foregone a match. Respondents who mistakenly believed they would keep all of their own retirement savings in a divorce were more likely to deliberately pass up maximising a higher match in a partner’s account, with 45 percent of those who picked an allocation that did not take advantage of the maximum match saying they knew they were doing so.

Georgia Lord, a financial planner at Corbett Road Wealth Management, noted that retirement often feels more personal and individualised than joint liabilities such as a credit card bill. However, she emphasised that what a spouse contributes affects the joint future equally as much as individual actions. Optimising household finances requires seeing the whole picture, rather than treating retirement accounts in isolation.

To address these coordination failures, Lord advises clients to treat retirement as a standing agenda item in their financial conversations at least once a year. This should occur any time there is a significant change for either partner, such as a new job, a move, or an addition to the family. The goal is to make coordination a habit rather than a one-off conversation, ensuring that couples do not leave money on the table due to oversight or misaligned assumptions.