When a household depends on a single paycheck, careful planning becomes essential for long‑term security. Financial specialists Christine Benz, director of personal finance and retirement planning at Morningstar, and senior editor Valentina Djeljosevic sat down to outline practical steps that single‑income couples can take to safeguard their future.
Start With the Basics: Budget and Retirement Contributions
Benz advises couples to look beyond the day‑to‑day budget and consider the long‑term picture. The first priority is to keep retirement accounts funded at a minimum level. “Make sure you are at least meeting any matching contributions in the 401(k) plan that are coming in through the employer,” she says. Matching dollars are essentially free money and should never be left on the table.
If the primary earner can afford it, additional contributions to a 401(k) or an individual retirement account (IRA) are beneficial. Even the non‑earning spouse can have an IRA, provided the earning partner has sufficient earned income to cover the contribution. This approach allows both partners to benefit from compound growth over time.
Reverse Budgeting to Stretch Every Dollar
For families living on a tight budget, Benz recommends a “reverse budgeting” method. Set a savings target first, then allocate any remaining funds to discretionary spending. This technique helps ensure that savings goals are met before lifestyle expenses consume the entire paycheck.
Build a Robust Emergency Fund
Because the family’s financial stability rests on one earner, Benz stresses the importance of a sizable emergency reserve. She suggests setting aside roughly a year’s worth of anticipated living expenses in liquid assets. If that primary fund is exhausted, a secondary line of reserves—such as the cash value of a permanent life‑insurance policy or a home‑equity line of credit—can provide additional breathing room.
When choosing where to hold these reserves, opt for money‑market funds or a taxable brokerage account that can be accessed without penalties. Retirement accounts, while valuable for long‑term growth, should remain untouched until retirement age to avoid taxes and early‑withdrawal penalties.
Smart Social Security Filing Decisions
Social Security benefits can be a critical component of retirement income, especially for single‑income households. Benz explains that couples often benefit when the higher‑earning partner delays filing. Delaying benefits beyond the full retirement age increases the monthly payment, which can be especially valuable if the lower‑earning spouse passes away first.
Because Social Security rules are complex, Benz advises couples to seek professional guidance to develop a filing strategy that maximizes lifetime benefits for both partners.
Consider Part‑Time or Contract Work
If the non‑earning spouse wishes to stay active in the workforce, part‑time or contract work can keep skills sharp and provide additional income. This flexibility can also serve as a safety net if the primary earner faces an unexpected job loss or health issue.
Take Advantage of Professional Resources
Both Benz and Djeljosevic emphasize that couples should not hesitate to use professional resources. Morningstar’s retirement planning tools, podcasts, and newsletters offer practical advice tailored to a variety of income situations. Engaging a certified financial planner can also help families create a customized roadmap that aligns with their values and long‑term goals.
In summary, single‑income couples can protect their financial future by consistently funding retirement accounts, maintaining a well‑stocked emergency fund, employing reverse budgeting, and making informed Social Security decisions. With disciplined planning and the right professional support, families can build a secure retirement even when relying on one paycheck.
Original reporting: Alexandria, VA News – WTOP News — read the source article.
