Women Outlive Men. Why Do They Retire Earlier?

Nicole Maestas, an associate professor of health care policy at Harvard Medical School. “Women right now tend to benefit more than men from working longer,” she said.

Based on current life expectancy tables, a typical girl born in the United States today will most likely live until she is almost 87 years old — nearly four years longer than a typical boy born in 2018.

But if current trends remain in place, she will probably earn less than he will, thanks in part, to a career that may be delayed or interrupted by bouts of caregiving, including motherhood.

That’s what the statistics show. And those longer life spans and lower earnings help to explain why women are generally poorer than men in their retirement — and why many women would benefit even more than men from working a bit longer.

In a column last month, I pointed out that the simple strategy of delaying retirement a few years — optimally, until at least age 70, when maximum Social Security benefits kick in — will produce extra monthly income that most people can’t match with investment, savings and cost-cutting alone.

With pensions disappearing and the stock market gyrating, Social Security — even with all of its problems — remains the most stable retirement pillar for perhaps 85 percent of the population. For those able and willing to work longer, the financial rewards from delaying retirement can be substantial.

But I didn’t discuss retirement gender issues in that column. That was a big omission.

While many men and women can benefit from the simple strategy of working longer, that approach tends to be even more useful for women. Yet relatively few women are actually making use of it: Women have, in fact, been retiring earlier than men, though that is generally not in their financial interest.

Those are the key insights of an important new research paper by Nicole Maestas, a professor of health care policy at Harvard Medical School. Her study, “The Return to Work and Women’s Employment Decisions,” is available as a National Bureau of Economic Research working paper.

In her study, Professor Maestas focused mainly on married heterosexual couples, although many of her findings apply to others in the population, including women who have never married or have divorced.

She found that husbands and wives “tend to retire at around the same time” but that “because women tend to marry men older than they, the joint retirement of married couples means that married women retire at younger ages than their husbands do.”

Married women tend to be two to three years younger than their husbands, and retire two to three years earlier, the data suggests. That earlier retirement age “seems counterintuitive,” she said, “since women have longer life expectancies and have shorter careers due to delayed or interrupted labor force participation while raising children.”

Optimally, she said, women should retire at “older ages than men.”

The standard reason for retiring at older ages — given in “The Power of Working Longer,” the paper I cited in the previous column — is that monthly Social Security benefits rise appreciably if you wait longer to claim them. In one case on the official Social Security website, for example, monthly benefits rise 76 percent through delaying retirement from age 62 to 70.

But the greater monthly benefits that come from delayed retirement are based on the actuarial expectation that you will have fewer months left in your life to collect those larger Social Security checks. On average, for the population as a whole, total lifetime benefits are expected to be the same, regardless of when an individual starts to receive them.

That is true for the population as a whole, yet there is a fundamental problem: For men and women, all things are not equal.

Women generally earn less than men — about 81 cents on the dollar in 2016 for the median woman, according to the Census Bureau. That not only means lower lifetime income, but also lower monthly Social Security benefits. In 2016 filings, Social Security data show, women received $1,216.62 in monthly benefits, on average, compared with $1,592.43 for men — a difference of $375.81 per month.

With lower lifetime earnings, less in savings and lower Social Security benefits, retired women are 80 percent more likely to live in poverty than men, a recent study by the nonprofit National Institute on Retirement Security found. (Widows and widowers receive benefits based on their spouses’ earnings, if they are higher than what they would otherwise receive. But that doesn’t entirely erase the disparity for women.)

For those healthy enough to work longer and able to find suitable employment, delayed retirement can ease financial strain. “Working longer can provide more financial resources,” Professor Maestas said in a phone interview. “And it so happens that women right now tend to benefit more than men from working longer.”

It isn’t simply that more women need the extra money. It is subtler, and the details matter.

Childbirth and bouts of caregiving have helped to make women’s careers shorter than men’s, and their peak earnings years have tended to be later. When they retire earlier than men, many women miss out on some of those higher earning years, Professor Maestas said.

That is significant because of the way Social Security is structured: More peak earnings years bring greater benefits. And when benefits are calculated, additional years of work at higher earning levels offset the less lucrative years — or replace the non-working years — that many women had earlier in their lives.

Her estimates show that for baby boomers, the inflation-adjusted, lifetime Social Security benefits for women — married, never married and divorced alike — rise between 9 percent and 10 percent when they work until 70 instead of 62, while lifetime (not monthly) benefits for men generally decline slightly if they delay retirement the same way. Furthermore, despite the gender wage gap, when both men and women work until 70, men’s advantage over women in lifetime Social Security benefits declines to just 4 percent, from 13 percent when they retire at age 62.

From a purely financial standpoint, then many women should retire later than men, yet the opposite is more commonly happening. Why? One reason is that couples often want to spend time together — and to retire together. Especially when the older partner has higher earnings, his preferred timing — and in today’s world, it usually is his, not hers — often prevails.

But the world is changing. Fewer heterosexual Americans are marrying, gays have begun to do so, women and transgender people are playing important roles in the workplace and demanding wage and benefit equality.

A couple of decades from now, Professor Maestas said, “If I did a study like this, I don’t think I’d be focusing on married heterosexual couples. I’d be looking at people, generally, and their partners, and their wage and benefit patterns.”

In the world we live in now, though, it may help to know that there is a retirement strategy that can help many hard-pressed people, especially working women.

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