January 10, 2019
A Social Security Reform for Mom
Created in the 1930s, Social Security’s spousal benefit – it’s half of a retired husband’s benefit – was the way to compensate housewives for the work of raising children.
The world has changed, but Social Security hasn’t been modified to reflect the rise of the full-time, working mother.
Today, married women frequently have earned enough to collect Social Security based on their own employment histories, rather than a spousal benefit. The problem comes when their earnings are reduced – and ultimately their Social Security benefits – because they disrupted their career paths and sacrificed pay raises to care for their children.
Single motherhood has also become very common, which means that a wide swath of women have no access to spousal and survivor benefits at all. Due to a higher divorce rate, one in four first marriages don’t last the full 10 years that Social Security requires to qualify for these benefits.
The erosion of spousal benefits points to a future in which “large numbers of women are going to move through retirement with more disadvantages” than previous generations, concludes a recent report by the Center for Retirement Research.
This problem could be addressed if Social Security gave credit to parents for caregiving. Caregiver credits are already pervasive in Europe, including Austria, Germany, Spain, Sweden, the Netherlands, and the United Kingdom, and they take various forms.
In this country, policy experts have proposed two different approaches to help parents with children under age six by increasing the earnings that dictate the size of their benefit checks. …Learn More
January 3, 2019
Here’s What Our Readers Liked in 2018
We’re kicking off 2019 with our periodic review of the most-read articles over the past year, based on the blog traffic tracked by Google Analytics.
Judging by the comments readers leave at the end of the blog posts, baby boomers are really diving into the nitty-gritty of preparing themselves mentally and financially for retirement. Financial advisers also frequently comment on Squared Away, and we hope some of our web traffic is because they’re sharing our blog with their clients.
Last year, Squared Away received recognition from other media. The Wall Street Journal recommended us to its readers for the blog’s “wonderful mix of topics.” The Los Angeles Times picked up our article, “Why Retirement Inequality is Rising.” MarketWatch published our posts about how pharmacists can help seniors reduce their prescription drug prices and about a Social Security reform to reduce elderly poverty.
The most popular blogs in 2018 fall into five categories:
The Big Picture
How Social Security Gets Fixed Matters
Future ‘Retirees’ Plan to Work
Just Half of Americans Enjoy Bull Market
Personality Influences Path to Retirement
How and When to Retire
Know About the 401(k) Surprise
How Retirees Can Negotiate Drug Prices
Work vs Save Options Quantified
What’s a Geriatric Care Manager Anyway?
Geriatric Help Eases Family Discord
Retirees Get a 401(k) Withdrawal Headache
Social Security Mistakes Can Be Costly …Learn More
December 20, 2018
Merry Christmas and Happy New Year!
Be safe during the holidays, whether you’re traveling across town or across the country to enjoy your family and friends.
We’re taking a break too at the Center for Retirement Research. This blog will return on Thursday Jan. 3 with a roundup of our readers’ favorite articles in 2018. …Learn More
November 29, 2018
Boomers Find Reasons to Retire Later
It is one of “the most significant labor market trends” in the United States, says Wellesley College researcher Courtney Coile.
She’s referring to big increases since the 1980s and 1990s in the share of older Americans in the labor force, including one in three men in their late 60s.
As for women, the baby boomers were really the first generation to thoroughly embrace full-time employment. Older women’s participation in the labor force hasn’t quite caught up with their male coworkers, but they’ve made impressive strides since the 1980s and have rapidly closed the retirement-age gap.
Given the implications of this trend for retirement security – the longer people work, the better off they’ll be – Coile and many other researchers have investigated what’s driving it. They agree on several things that are changing the retirement calculation.
College. College graduation rates have increased dramatically over the past few decades, and people who’ve spent at least some time in college tend to remain in their jobs longer. This trend has played a big role in the increase in baby boomers’ participation in the labor force, Coile said.
Social Security. Three major reforms to the program have boosted U.S. retirement ages. A 1983 reform is slowly increasing the age at which workers are eligible to receive their full benefits, from 65 for past generations to 67 for workers who were born after 1959. This amounts to a significant benefit cut at any given age that a retiree claims his benefits. Various studies show that this has created an incentive to delay signing up for Social Security in order to increase the size of the monthly benefit checks.
The 1983 legislation also played a role in pulling up the average retirement age by providing larger monthly benefit increases for people who delay Social Security beyond their full retirement age. In 2000, a third reform ended the temporary withholding of some benefits that had been in place for people in their late 60s who worked while simultaneously collecting Social Security.
Employer retirement plans. Two employer benefits that encourage people to retire at relatively young ages have largely gone by the wayside in the private sector. …Learn More
November 15, 2018
Why Couples Retire Together – or Don’t
Married couples don’t necessarily know what the other spouse is thinking about retirement.
This insight came out of a new Fidelity Investments survey that asked some 1,600 people if they knew when their significant other planned to retire. Only 43 percent answered the question correctly. This disconnect reveals just how few couples are talking about retirement, said Fidelity spokesman Ted Mitchell, who worked on the survey.
Fidelity’s survey went out to adults of all ages, so the younger ones no doubt felt they’re too young to be thinking – much less talking – about what their lives will be like decades from now.
But things change as couples age. When retirement comes into sharper focus, it’s natural to start talking through the options – mine, yours, and ours.
One option is to retire around the same time, and prior research has shown that roughly half of older couples do so.
New research takes a more nuanced look at how couples retire and finds a more complicated picture. Mixed arrangements are common in the pre-retirement years. Perhaps one spouse continues working full-time, even though their partner has retired, or one spouse might shift down to part-time work while the other is either still in a full-time job or has already retired.
Two sentiments are usually in conflict when older workers are trying to decide whether to retire: a longing for more leisure time and a need to bank more in savings, Social Security, and pensions.
Spouses often influence one another’s retirements for a variety of reasons, including their health, their relative ages, and how much each one likes their job. But financial security is usually a major consideration. …Learn More
November 8, 2018
A Proposal to Reduce Widows’ Poverty
A dramatic decline in widow’s poverty over a quarter century has been a positive outcome of more women going to college and moving into the labor force.
Yet 15 percent of widows are still poor – three times the poverty rate for married women.
A new study by the Center for Retirement Research takes a fresh look at Social Security’s widow benefits and finds that increasing them “could be a well-targeted way” to further reduce poverty.
Widows are vulnerable to being poor for several reasons. The main reason is that the income coming into a household declines when the husband dies. The number of Social Security checks drops from two to one, and any employer pension the husband received is reduced, or even eliminated if the couple didn’t opt for the pension’s joint-and-survivor annuity.
While one person can live more cheaply than two, the drop in income for new widows often isn’t accompanied by a commensurate drop in expenses.
Another issue begins to develop as much as 10 years before a husband dies. Prior to his death, his declining health may increase the couple’s medical expenses and reduce his ability to work, depleting the couple’s – and ultimately the widow’s – resources.
The irony today for wives who worked is that their decades in the labor force generally improve their financial prospects when they become widowed. Yet, under Social Security’s longstanding design, they receive less generous benefits than housewives – relative to the household’s benefits prior to the husband’s death. …Learn More
October 25, 2018
Longevity Affects Social Security Benefit
It’s long been known that people with high earnings tend to live longer than low earners. But this gap in life expectancy has widened into a gulf.
For example, high-earning men born back in 1912 lived about eight months longer than their counterparts in the bottom half of the income range. This longevity gap increased to five years for men who were born in 1941 and are now in their late 70s. The disparity for women is similar, but not as extreme.
This growing longevity gap has important implications for Social Security. The program’s intent is to be progressive – more generous to lower-income retirees. But the unequal life spans have significantly reduced that progressivity, concludes Matt Rutledge in a new synopsis of research in this area for the Center for Retirement Research, which sponsors this blog.
The reason low-income workers are losing ground is that they don’t live as long, so they don’t collect Social Security for as many years as high-income workers do.
A study by the National Academy of Sciences, one of several demonstrating the decline in the program’s progressivity, found that the value of lifetime Social Security benefits, adjusted for inflation, increased nearly 30 percent for the highest-income retirees born in 1960, compared with the top earners born 30 years earlier. But benefits either fell or stagnated over that time for retirees on the lowest two tiers of the income scale – the people who rely far more on Social Security. …Learn More