September 2016

Photo of an older couple

Wives Pay Price to Retire with Husbands

Wives like to retire around the same time as their older husbands – so they can play. But what a difference the baby boom generation has made.

For boomer wives, as members of the first generation of women to enter the U.S. labor force en masse, there can be a steep cost to leaving the labor force at a relatively young age to retire with an older husband. New research by Nicole Maestas of the Harvard Medical School bears out this logic.

It’s obvious that working wives can increase their earnings from work by resisting the urge to retire at a relatively young age. And married women generally earn much more, relative to their husbands, than in the past.

But, more often than their mothers and grandmothers, boomer wives can increase their own Social Security benefits by continuing to work.

To understand how this works, compare boomers with their grandmothers. Their grandmothers were probably housewives for most of their lives and worked sporadically or part-time. As a result, their husbands’ earnings determined the size of the spousal retirement benefits they received from Social Security.

The situation is very different for boomer wives, who often have worked enough to earn their own benefits and wouldn’t qualify for a spousal benefit. Social Security calculates their benefits, as they do for all workers, using the average of her highest 35 years of earnings. But here’s the rub: many boomer mothers still haven’t accumulated 35 years of substantial earnings, because they took some time off or worked part-time to raise children. …
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Illustration of different family types

Finances Change with US Family Structure

  • One out of every 10 Generation X mothers is single – many more than in the generation born during World War II.
  • Nearly two-thirds of single older people are the survivors of divorce – far more than in the past.
  • About one in three couples has moved away from their hometowns and from both of their mothers – blame this geographic mobility on the growing share of U.S. workers who are college educated.

These are just a few of the dramatic changes in U.S. family structure and behavior that have developed over the past half century.  These changes have had enormous financial consequences for everyone, especially women.

Squared Away has documented some of the financial impacts in previous blogs. A Lucky 7 such blogs, most of them based on studies by the Retirement Research Consortium, are summarized below (with links to each one):

  • Women are having babies five years later, on average, increasing their earnings substantially over their lifetimes.
  • About half of Americans don’t live near their mothers, creating new pressures for caregivers. This video explains who they are.
  • In the aftermath of divorce, many women figured out how to rebound in the labor force and earn more.
  • But when it comes to retirement preparedness, a doubling in the divorce rate since 1990 has put more baby boomers at a financial disadvantage.
  • Stepchildren, divorced parents, blended families – the structure of the parent-child relationship has grown more complex, and so have the parents’ wills. …

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