How Divorce Affects Women’s Earnings

Chart: Divorce Rate Peaks Around 1980In the aftermath of the women’s movement of the 1960s and 1970s, the incidence of divorce climbed, peaking around 1980.

Millions of women were suddenly on their own at a time when women were still having to prove themselves to many employers.  But I remember being impressed by a college friend’s mother whose divorce wasn’t the disaster her family feared: she marched into a high-profile non-profit in Chicago and landed an impressive job.

It’s been well established in academic research that women often face financial struggles after divorce.  Married women are typically better off, since couples can live more cheaply and since two incomes are better than one.

But a new long-term study of women who divorced during the mid-1970s indicates there were “positive effects of marital dissolution:” higher earnings. …Learn More

debt climber

Retirement Delayed to Pay the Mortgage

Older Americans who are in debt are choosing to delay their retirement, researchers conclude in a new working paper.

In earlier findings released last summer, the researchers, Barbara Butrica and Nadia Karamcheva of the Urban Institute, documented the growing prevalence of borrowing since the late 1990s among adults ages 62 through 69. Median debt levels among those who owe also surged from $19,000 to $32,100, adjusted for inflation – and debts as a share of their assets increased.

Now comes the rest of the story. When the researchers controlled for health, financial assets, home values, and other forms of wealth, as well as spouses’ earnings and other factors that play into decisions about retiring, they found that individuals with debt, especially mortgages, behave differently than those who are debt-free.

Here are their main findings:

  • Nearly half of all people in their 60s with debts continue to work, compared with only one-third of those who have no debt. …

Learn More

Clocks in sand

Parents’ Longevity Sways Plans to Retire

Penny DeFraties, a teacher, shared her reaction to a 2012 article that appeared on this blog:

The day I hit my minimum retirement age, I’m gone. I look forward to traveling, gardening, spending time with my grandkids, and volunteering at church, the American Red Cross and USO. My first husband died of a heart attack at 49-years-old, and my current husband lost his first wife to MS at 50-years-old.

The notion that life is short is a valid reason to retire – to travel or enjoy the grandchildren before it’s too late. And the academic literature clearly shows that the age at which people exit the labor force is related to how long they expect to live.

Building on this research, a new study nails down how we arrive at our personal estimates of our life expectancy and provides new insight into the critical retirement decision.

Using data for individuals between the ages of 50 and 61, economists Matt Rutledge and April Yanyuan Wu with the Center for Retirement Research (CRR) and Boston College doctoral candidate Mashfiqur Khan confirmed that individuals estimate their own life expectancy based in part on how long their parents lived. (Full disclosure: the CRR supports this blog.)

They went on to link this “subjective life expectancy” with when older workers plan to retire, as well as when they actually do retire. …Learn More

Photo: Crossroad signs of work and retirement

Laid-off Boomers: Retirement as Default

The natural reaction to losing a job is to get a new one.  But when older people become unemployed, some view it as a dilemma: look for work or just retire?

The presence of a financial safety net significantly increases the likelihood that an older, unemployed person will retire.  And that decision often comes quickly after they lose their job, concluded a new study by Matt Rutledge, an economist for the Center for Retirement Research, which supports this blog.

“The brevity of [their] jobless spells suggests that older individuals have little tolerance for a job search” and will “make a quick exit” if they have financial resources backing them up, Rutledge wrote in a recent summary of his research.

His findings get to the heart of the difficult choices facing older workers when they are laid off, no more so than amid the Great Recession when the jobless rate among people over age 55 hit a record 7.3 percent.  Rutledge tracked individuals between 55 and 70 who lost their jobs between 1990 and 2012. …Learn More

Food Stamps Need Rises in Good Times

Enrollment in the federal food stamp program, known as SNAP – for Supplemental Nutrition Assistance Program – has more than doubled over the past decade to 47 million.

What’s remarkable is that for the first time the number of Americans receiving food stamps increased even in a period when the economy was growing. During the 2003-2007 expansion, the SNAP case load, in a break with historic trends, rose 24 percent.

One explanation is the change in the longstanding correlation between the unemployment rate and poverty, according to research findings by economists Matt Rutledge and April Yanyuan Wu of the Center for Retirement Research, which were presented at the Retirement Research Consortium meeting in August.

Poverty used to fall in tandem with the jobless rate, reducing the need for food stamps. But the researchers found that the mid-2000s expansion was different: poverty did not decline as the economy grew.

In the recovery that has followed the Great Recession, the number of people receiving food stamps continued to rise, according to federal data.

The assumption has always been that a stronger labor market will reduce the need for food stamps. But this new trend suggests rising employment might no longer be enough. Reducing the food stamp rolls may require a broader recovery or initiatives to reduce poverty and provide more jobs for the marginally employed.

Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed do not represent the opinions or policy of SSA or any agency of the federal government.Learn More

Graphic: Thinking wires in brains

Social Security Claiming and Psychology

It’s common for people to begin collecting their Social Security benefits soon after they turn 62, ignoring the financial planners and retirement experts urging them to postpone and increase the size of their monthly checks.

A new study has uncovered four powerful psychological traits that influence this decision: the individual’s expected longevity, his fear of loss, whether he perceives the Social Security system as fair, and patience.

The study surveyed some 3,000 people, primarily in their 40s and 50s. This is a good age to ask about Social Security, because claiming the benefit is a few years away, “but they’re thinking more about it,” researcher Suzanne Shu said when presenting the findings at an August meeting of the Retirement Research Consortium in Washington.

In an online survey, Shu, who is from the University California at Los Angeles, and John Payne, from Duke University, posed a series of questions designed to understand the psychology of the individuals they were studying. They also asked when they planned to claim their Social Security and then determined which psychological traits were linked to those who said they planned to file early.

Four influences on claiming came out of their preliminary findings:

Fear of loss. People who have a stronger aversion to financial loss also tended to say they would claim earlier. To them, the researchers said, a delay in receiving their benefit checks “looks like a potential loss.” …Learn More

Photo: Modern house with pool

Nearly Retired, Lugging a Mortgage

Traditionally, the picture-perfect retirement included a paid-off house. But the Me Generation isn’t sticking to the script.

Snapshots of three generations of U.S. households on the cusp of retirement – people born in the Depression, at the beginning of World War II, and after the war – show that more of the most recent generation, the baby boomers, are still carrying mortgages as they head into their retirement years.

About 40 percent of households who were between the ages of 56 and 61 in 1992 – the Depression-era parents of baby boomers – held mortgages at that age. This share had increased to 48 percent by 2008, as the front wave of baby boomers were reaching their late 50s and early 60s

“The current generation has bought larger, more expensive homes, and they arrive at retirement with more mortgage debt,” concluded George Washington University business professor Annamaria Lusardi, who presented the findings of her study with Olivia Mitchell of the Wharton School during an August meeting of the Retirement Research Consortium. …Learn More