One-Income Household Retirement: Maximizing a Single Salary
Building retirement security on one income requires strategy. Here's how to make every dollar count.
Key Takeaways
- 1Spousal IRA allows the non-working spouse to save for retirement too.
- 2You can contribute to TWO IRAs on one income ($14,000-$16,000/year).
- 3Social Security spousal benefit provides 50% of worker's benefit to non-working spouse.
- 4Life and disability insurance on the earner is absolutely critical.
- 5Maximize employer 401k match - it's the best return on investment.
- 6Consider the non-working spouse returning to work part-time for their own Social Security record.
The Spousal IRA Advantage
A Spousal IRA lets the non-working spouse contribute to retirement even without their own income. This effectively doubles your IRA contribution capacity.
- **Requirement:** Must file taxes jointly
- **Income requirement:** Working spouse must earn at least total IRA contributions
- **Separate accounts:** Each spouse has their own IRA account
- **Roth option:** Both can choose Roth if income-eligible
| Account | Owner | 2024 Limit | Catch-Up (50+) |
|---|---|---|---|
| Spouse 1 IRA | Working spouse | $7,000 | +$1,000 |
| Spouse 2 IRA | Non-working spouse | $7,000 | +$1,000 |
| **Total IRA** | Household | **$14,000** | **+$2,000** |
| + 401(k) | Working spouse | $23,000 | +$7,500 |
| **Grand Total** | Household | **$37,000** | **+$9,500** |
Protecting the Sole Earner
In a one-income household, the earner's ability to work IS your retirement plan. Protection is critical.
- **Life insurance:** The earner needs substantial coverage (10-12x income minimum)
- **Disability insurance:** Even more important than life - covers living earner who can't work
- **Employer coverage:** Often inadequate - consider supplemental policies
- **Health insurance:** Prioritize family coverage; medical bankruptcy is real
- **Emergency fund:** 6-12 months expenses if earner loses job
| Protection | Recommended Amount | Why |
|---|---|---|
| Life Insurance | 10-12x annual income | Replace earner's lifetime income |
| Disability Insurance | 60-70% of income | Income if earner can't work |
| Emergency Fund | 6-12 months expenses | Job loss buffer |
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Optimization Strategies
Make every dollar work harder when there's only one income:
- **Prioritize 401k match:** This is 50-100% instant return - max it first
- **HSA if available:** Triple tax advantage beats IRA and 401k
- **Tax bracket management:** One income often means lower bracket - Roth may win
- **Automate everything:** Set up automatic transfers to savings and retirement
- **Live below means:** The difference between your income and spending IS your retirement
- 1Get full employer 401k match (free money)
- 2Max HSA if you have HDHP ($8,300 family limit 2024)
- 3Fund both spousal IRAs ($14,000-$16,000)
- 4Add more to 401k beyond match
- 5Consider taxable brokerage if maxed all tax-advantaged
Consider Part-Time Work
The non-working spouse returning to work even part-time can significantly boost retirement security:
- **Own Social Security record:** Replaces $0 earning years
- **Access employer 401k:** Second retirement account with potential match
- **Reduced reliance:** Less pressure on single income
- **Flexible options:** Part-time, seasonal, or remote work
- **Healthcare:** Some part-time jobs offer benefits
Don't Skip Life & Disability Insurance
In a one-income household, the earner's disability or death is catastrophic. Life insurance is cheaper than you think, and disability insurance is essential. A healthy 35-year-old can get $500k term life for under $30/month. Your family's entire financial future depends on protecting the earner.
Extra Security for Single-Income Families
When your entire retirement depends on one income stream, you need investments that provide maximum security. A Gold IRA adds protection.
- Diversify both spousal IRAs with a portion in gold
- Physical gold protects against market crashes
- Tangible security for your family's future
- Hedge against inflation eroding your purchasing power
- Peace of mind knowing your savings have real, physical value
Frequently Asked Questions
1Can we both contribute to IRAs on one income?
Yes! This is called a Spousal IRA. As long as you file taxes jointly and the working spouse earns at least as much as the total IRA contributions, both spouses can contribute up to the annual limit. In 2024, that's $7,000 each ($8,000 if 50+) for a household total of $14,000-$16,000.
2Does the non-working spouse get Social Security?
Yes, through spousal benefits. The non-working spouse can receive up to 50% of the working spouse's full retirement age benefit, even with zero work history. They're also eligible for survivor benefits (up to 100%) if the working spouse passes away.
3Should the non-working spouse return to work before retirement?
It can help significantly. Even 10 years of part-time work can improve their own Social Security benefit, give access to an employer 401k, and reduce pressure on the single income. Flexible, part-time, or remote work options make this more feasible than ever.
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Social Security for One-Income Couples
Good news: The non-working spouse still qualifies for Social Security through spousal benefits.
Example: Social Security for One-Income Couple
If the working spouse's benefit at FRA is $2,800/month, the non-working spouse receives $1,400/month (50%). Combined household benefit: $4,200/month. If earner dies, survivor can receive full $2,800/month.