Decision Making Retirement

There are important differences in the economic circumstances of women and men as well as in the retirement decision-making process. Women enter retirement with fewer resources than men. In 1998, the median income for an unmarried woman age sixty-five or older was $11,382, compared with $14,496 for an unmarried man and $30,176 for a household headed by a person age sixty-five or older. To a large extent, lower incomes among older women and minorities reflect disparities in pensions and other assets, with Social Security benefits partially narrowing the gap. Postretirement earnings are a significant source of income for some younger retirees, who will tend to lose this source of income as they grow older. Although retirement at a younger or older age can influence income in retirement, marital history, work history, health, and savings during younger years are the primary factors affecting retirement income.

Differences by race and gender in pension coverage and assets are particularly striking. In 1998, nearly half (49 percent) of white men age sixty-five and over had income from employer-sponsored pensions from either private sector or government jobs, while only 34 percent of African-American men and 26 percent of Hispanic men had pension income. Older women were even less likely to have pension income. Only 28 percent of white women, 21 percent of African-American women, and 10 percent of Hispanic women had such income.

The size of pensions also varies markedly by race and gender. Among older women who do receive income from pensions, benefits are approximately half the size of men’s pension benefits. There are also significant differences in the size of pensions by race and ethnicity.

Marital status is important not only because of the large gap between the income of couples and unmarried persons, but also because older women are much less likely to be married than older men. In 1998, 75 percent of men age sixty-five and older were married, compared with 43 percent of women. Because of their longer life expectancy and because men tend to be older than their wives, women are more likely than men to outlive their spouses and less likely to remarry as the pool of eligible partners shrinks.

The lower-paid jobs that women frequently hold are less likely to carry pensions and health insurance. While there has been some improvement in the number of women receiving pensions based on their own work records, women’s access and participation in workplace pensions continue to lag behind men’s. In the 1990s, women who were working full-time were enrolled in employer-provided pension plans at about the same rate as men, but many more women than men work at part-time jobs that do not provide pensions. Overall, more than 44 percent of women age forty-five to sixty-four were not participating in a pension plan from any employer (including former employers), compared with 36 percent of men. Because women have shorter and less lucrative careers, they will also continue to have smaller pensions than men. Furthermore, small accumulations in pension plans are typically cashed out either before or after retirement.

Women’s shorter working lives and lower earnings contribute to a reduced ability to save for retirement. Women who spend time as unpaid family caregivers are at least partially dependent on the earnings of their husbands, and on how these earnings are translated into retirement income. Pensions that provide no survivor benefits or that give the survivor only a small portion of the worker’s pension can lead to greatly reduced income for widows in retirement. If a couple is divorced, or if the husband dies before reaching retirement age, the wife is unlikely to be able to make up entirely for the loss of income and savings that follows divorce or widowhood.

Health problems can occur at any age for both women and men and may reduce savings, especially if health insurance has been inadequate. Problems of health, low-paying jobs, and periods of unemployment also contribute to the lower likelihood of pensions and savings for minorities, both women and men.

To what extent will retired women be better off in the future? The Social Security Administration’s Modeling Income in the Near Term (MINT) model projects that poverty among older women will be as big a problem in 2020 as it was in 1991 when 12 percent of older women were living in poverty. This is partly due to the persistence of the wage gap and women’s greater propensity to work part-time. It also reflects a prediction that more women will enter retirement divorced or never married. Poverty among older divorced women will remain high (22 percent) and poverty among never-married mothers will increase from 23 percent to 35 percent. Poverty rates among older people of color are also expected to remain high.