January 5, 2023

As the lower-paid sex, women have no shortage of insecurities about their retirement finances.

Only one in five working women feels “very confident” of being able to retire comfortably, the Transamerica Center for Retirement Studies reports in its annual retirement survey. More than half say they don’t earn enough or have too much debt to leave a lot of room for saving. Four in 10 expect to retire after 70 or not at all.

These insecurities probably reflect, to some extent, the poor retirement preparedness of Americans as a whole, not just women. In fact, women have made significant strides over the past half century. A new study documenting their personal and economic progress since the 1970s finds that their financial standing, compared with men, has improved.

Granted, women are still a long way from pay parity. But the improvements in retirement preparedness are impressive because they occurred despite the fact that women have become more independent – they are more likely to be living on their own and supporting themselves. Roughly two-thirds of boomer women born after 1953 either have never married or have been divorced for some part of their adult lives, according to the Center for Retirement Research.

What undergirds their personal and financial independence are college degrees and women’s growing participation in the labor force over five decades.

One in three baby boomer women born in the mid-1950s through the mid-1960s has a college degree – twice that of their mothers who were born during the Great Depression. Armed with the degrees, young boomer women flooded into the labor force. Three-fourths were working between their mid-30s and mid-40s, compared with 57 percent employment in the Depression-era cohort at that age. Men’s labor force participation has been much higher historically but barely changes over time.

Black women have always worked more than White women. But they too increased their labor force participation as they gained more education.

So how has women’s robust participation in the work world bolstered their financial security? …Learn More

On the Web

January 3, 2023

Older Americans who want to be smart about retirement finances are curious about the intricacies of Social Security.

The blog that drew the most traffic from our readers last year – “The Bridge to a Larger Social Security Check” – suggested a strategy for getting more out of the program: delay signing up for Social Security by withdrawing savings from a 401(k) to pay the bills.

Each year that Social Security is postponed adds 7 percent to 8 percent to a retiree’s monthly benefit check. A couple of years of delay, funded with savings, can provide significantly more money, month after month, to pay the bills. The researchers concluded from an experiment that asked older workers to consider the delay strategy that a substantial minority “are interested in a bridge option despite its unfamiliarity.”

Another popular blog last year was about an experiment involving another unfamiliar concept fundamental to the program: the Retirement Earnings Test. In “Explaining Social Security’s Earnings Test,” readers learned that any reduction in benefits that occurs if they simultaneously work and collect the benefit in their early to mid-60s is not a tax.

Instead, under Social Security’s rules, some of an older worker’s benefits may be deferred. The benefits are incrementally added back into his monthly checks after he reaches his full retirement age under the program. Understanding that the reduction in benefits is a deferral, rather than an outright cut, is an important aspect of the program that is increasingly important for older workers looking for strategies to improve their standard of living in retirement.

If delaying Social Security is good for older workers’ financial security, the article “COVID’s Impact on Social Security Claiming” delivered a little good news. The generous, extended unemployment benefits approved by Congress made it easier for older workers who lost their jobs during the 2020 spike in unemployment to remain in the labor force rather than sign up early for their benefits and lock in a smaller monthly check.

This positive pandemic trend was a stark contrast to the Great Recession. During months of protracted unemployment following the 2008 financial crisis, jobless older workers became more likely to resort to signing up for Social Security because they needed income.

One aspect of retiring and aging that can really throw a wrench in financial planning is medical costs. In “A Start on Estimating Retiree Medical Costs,” the researcher estimates that retirees with average healthcare needs must cover about 22 percent of their total out-of-pocket costs, excluding premiums, or just over $67,000 in total over their remaining lives. Retirees needing high levels of care can spend twice as much.

Another unknown: long-term care. A study covered in “Spouse in Nursing Home Raises Poverty Risk” finds that one in three married people in their early 70s is likely to have a spouse who will eventually wind up in a nursing home. Not all nursing home stays are for an extended period of time. But if an unlucky spouse does have a long stay, the couple is significantly more likely to become impoverished while paying for the care.

Other popular blog topics in 2022 included Medicare, work, and profiles of individual retirees: …Learn More