Women who re­tire when hus­bands do can lose out

Austin American-Statesman Sunday - - BUSINESS SUNDAY - Liz We­ston

Women who re­tire when their hus­bands do might be giv­ing up more wealth than they re­al­ize.

Mar­ried women over­all are still in their peak earn­ing years in their 50s and early 60s, while mar­ried men’s earn­ings are on the de­cline, says econ­o­mist Ni­cole Maes­tas, an as­so­ci­ate pro­fes­sor of health care pol­icy at Har­vard Med­i­cal School and the au­thor of a re­cent study about cou­ples’ in­come and re­tire­ment pat­terns. As a re­sult, mar­ried women typ­i­cally sac­ri­fice more So­cial Se­cu­rity wealth than mar­ried men when they re­tire early, says Maes­tas, who an­a­lyzed the Univer­sity of Michi­gan’s Health and Re­tire­ment Sur­vey of more than 20,000 peo­ple 50 and older.

So­cial Se­cu­rity ben­e­fits are based on a per­son’s 35 high­est-earn­ing years, so each ad­di­tional year an older mar­ried woman works could re­place an ear­lier year when her in­come was lower or she took time out of the work­force —

for in­stance, to raise chil­dren. Be­cause older mar­ried men are typ­i­cally past their peak earn­ing years, the same is not true for them, Maes­tas found.

But women do typ­i­cally re­tire at the same time as their hus­bands, Maes­tas says. Since women in het­ero­sex­ual cou­ples typ­i­cally marry men two or three years older, that means mar­ried women leave the work­force at younger ages.

Women face added risks

Ear­lier re­tire­ments also mean less time to save for re­tire­ments that can stretch decades. That should give women pause, says Jean Set­z­fand, se­nior vice pres­i­dent of pro­grams for AARP.

“We live longer. We spend more years in re­tire­ment. There are more years we have to con­sider fi­nanc­ing,” Set­z­fand says.

Women’s longer life ex­pectan­cies mean they’re likely to out­live their hus­bands, and they’re at greater risk of out­liv­ing their sav­ings. Women are 80 per­cent more likely than men to live in poverty af­ter age 65, ac­cord­ing to the Na­tional In­sti­tute on Re­tire­ment Se­cu­rity.

So­cial Se­cu­rity checks, if they’re big enough, can be a pow­er­ful an­ti­dote to late-in-life poverty. So­cial Se­cu­rity ben­e­fits can’t be out­lived, re­duced by stock mar­ket down­turns or stolen by fraud­sters, Maes­tas notes.

De­lay So­cial Se­cu­rity, if not re­tire­ment

Peo­ple don’t have to claim So­cial Se­cu­rity when they re­tire, although many do. About 39 per­cent of women and 35 per­cent of men in 2017 filed at the ear­li­est age, which is 62, ac­cord­ing to the Cen­ter for Re­tire­ment Re­search at Bos­ton Col­lege. That locks them into checks that are sig­nif­i­cantly smaller than if they’d waited a few years.

Ben­e­fits rise by about 7 per­cent each year be­tween age 62 and full re­tire­ment age, which is cur­rently 66. Af­ter that, checks in­crease by 8 per­cent each year un­til ben­e­fits max out at age 70. A $1,000 monthly ben­e­fit at 62 could be over $1,300 at 66 or over $1,700 at 70, even if some­one stops work­ing.

No other in­vest­ment can of­fer that kind of guar­an­teed re­turn, which is why planners of­ten en­cour­age their clients to tap other re­tire­ment funds if that al­lows them to de­lay claim­ing So­cial Se­cu­rity.

It’s not just about money

Fi­nan­cial con­sid­er­a­tions are just one part of the de­ci­sion, fi­nan­cial planners say. Cou­ples also have to con­sider the emo­tional and psy­cho­log­i­cal is­sues of re­tir­ing to­gether or apart.

“The be­gin­ning of re­tire­ment is an ex­cit­ing time, and many cou­ples en­joy start­ing that jour­ney to­gether,” says Stephanie Mushna, a cer­ti­fied fi­nan­cial plan­ner in Grand Rapids, Michi­gan.

Peo­ple ap­proach­ing re­tire­ment age are of­ten keenly aware that their time on earth, and their good health, won’t last for­ever. That can make it harder to stick it out, es­pe­cially if it’s at a job they don’t like. But work­ing even a year or two longer can have a dra­matic im­pact on the vi­a­bil­ity of a cou­ple’s fi­nan­cial plan and the amount they can spend in re­tire­ment, planners say.

Other op­tions are step­ping down to a lower-stress job or one with more flex­i­bil­ity. In­stead of trav­el­ing full time with a re­tired spouse, wives may be able to sched­ule some ex­tended va­ca­tions, Set­z­fand sug­gests.

That as­sumes, of course, that women can find such jobs. Many of the women who will be most de­pen­dent on So­cial Se­cu­rity may be locked into jobs with lit­tle flex­i­bil­ity, she notes. Health con­cerns and caregiving for fam­ily mem­bers also can push women out of the work­force ear­lier than they ex­pect.

Maes­tas un­der­stands that not every mar­ried woman wants or will be able to keep work­ing, but she hopes her re­search will at least prompt cou­ples to dis­cuss their op­tions.

“It of­ten does make sense to at least de­lay claim­ing So­cial Se­cu­rity,” Maes­tas says. “But there’s not re­ally one right an­swer for ev­ery­one.”

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