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Retirement, Decision Making


Early literature on retirement focused almost exclusively on men. More recently, researchers have recognized that women may make the decision to retire somewhat differently from men due to differences in caregiving responsibilities, employment opportunities and cultural expectations. In addition to the economic and health factors, recognition of these differences reminded researchers that, in addition to economic and health factors, caregiving responsibilities and the desire to retire at the same time as a spouse can influence both men and womens decisions. Significant differences in the economic resources and care-giving responsibilities of older men and women can lead to differences in the timing of retirement and also to the adequacy of income in retirement.

Since World War II men have been retiring at earlier ages, while the trend in older womens work force participation has been upward. Between 1950 and 1999, the labor force participation of men fell from about 86 to 68 percent while womens participation increased from 25 to 50 percent. At ages 65 and over, mens participation declined even more, from 47 to 16 percent compared with a marginal decline from 10 to 9 percent for women. Most of the decline for men occurred before 1985 with fairly stable rates since then, while older womens work force participation has continued to increase.

Retirement trends have important implications for public policy. The age at which workers retire has an important impact on labor supply, affecting job prospects for younger workers as well as employers access to experienced workers. The financial solvency of government retirement programs such as Social Security and Medicare are directly affected by retirement trends. Public policies and tax law regulating employer-based pensions, individual retirement accounts, and other savings vehicles are also impacted by trends in retirement. Thus, there is a public interest in the retirement decision-making process.

Defining retirement

To fully understand older mens and womens experience of retirement, it is necessary to define what the term retirement means. A commonly used definition is that retirement is an age-related withdrawal from active working life. Of course, defining what constitutes an active working life is not so simple. Does it mean paid employment only? Should leaving employment because of job loss, disability, or caring for a sick family member constitute retirement? At what age does leaving an active work life constitute retirement?

Some researchers have tried to bypass these questions by simply allowing survey respondents to define themselves as either retired or not retired. The disadvantage of this approach is that the definition of retired will not be the same for everyone. Some people who are still working may consider themselves retired if they are receiving a pension from a previous job. Others who have been out of the labor force for many years to care for children and elderly relatives, or because they themselves are disabled, may not consider themselves retired even though they are well past the age when many people retire.

Different definitions of retirement lead to different conclusions about the retirement patterns of women and men. Defining retirement as not working or looking for work at specific ages always counts more women than men as retired at each age. However, if one looks at self-reported retirement, women are often less likely to be retired than men. The major source of difference is the nonmarket work of women, including caregiving responsibilities for children, parents, spouses, and other relatives, as well as housekeeping tasks culturally expected of women. For example, one study found that over 20 percent of women in their fifties and early sixties were not in the labor force due to reasons other than retirement, compared with only 8 percent of men. At the same time, more men than women considered themselves to be retired.

As there is no single best definition of retirement, it is appropriate to tailor the definition of retirement to whatever question is being asked. If one is interested in when workers decide to collect pensions and/or Social Security benefits, it is appropriate to treat retirement as an event. Another kind of research focuses on the economic and social well-being of retired people. In this case, retirement is considered to be a stage of life rather than an event. Most such research considers everyone who has reached a stated age, usually sixty-five, as retired, regardless of whether they continue to work. Less commonly, two or more criteria are combined. For example, only people over sixty-five who are not in the paid work force may be included in the retired population. Multiple definitions of retirement are useful in addressing specific questions about differences in mens and womens decisions about leaving the paid work force, and about their economic well-being after the age when peoples active working lives usually end.

What influences the decision to retire?

For an understanding of why workers retire when they do, it is necessary to follow peoples work experiences as they approach and enter retirement. This is possible only with longitudinal surveys, in which the same people are interviewed over time. One commonly used source of this kind of information is the Health and Retirement Study (HRS), conducted by the University of Michigan, in which a sample of men and women between fifty-one and sixty-one years of age were interviewed in 1992 and then reinterviewed at two-year intervals. Much of the recent research on retirement relies on these data (information on the HRS is available on line at

Longitudinal surveys have found that many workers do not go from full-time employment to not working at all, but rather to what some researchers have called partial retirement or bridge jobs which are part-time or short-term jobs. Part-time employment is particularly common among workers age sixty-five and older. Among workers age fifty-five to sixty-four, 83 percent work full-time; among workers age sixty-five and older, only 49 percent work full-time. An increase in workers aged sixty-five or older who have been at their current jobs less than one year is further evidence of the prevalence of bridge jobs. From 1987 to 1998, the proportion of workers age sixty-five and older who had been at their jobs less than one year increased from 10 percent to 16 percent. While some of these workers may be continuing their careers, albeit with different employers, it is likely that many are employed in bridge jobs.

There is evidence that women are more likely to go through this intermediate bridge stage of retirement. One study estimated that 40 percent of women (compared with 25 percent of men) hold a bridge job before retiring completely (see Quinn and Kosy, 1996). Defining partial retirement is again an issue. Because women are more likely to work part-time at any stage of life, they are more likely than men to be considered partially retired, even though they may not have reduced their work hours. However, when asked in surveys, more men than women described themselves as partially retired.

An added complication is that some people who are considered retired at one point in time may later return to work. Over 10 percent of women and 12 percent of men who were not working and considered themselves retired at the first HRS interview were employed two years later; an additional 1 to 2 percent were looking for work. An earlier study using a sample of workers who began receiving Social Security benefits in 1980 found that about 20 percent of both women and men were working when interviewed about two years later (see Iams 1986). Some of these workers may have been partially retired when they began receiving Social Security benefits, but others may have stopped working entirely and started working again when they found a good opportunity or felt they needed more income after they had stopped working.

A great deal of research on the factors that influence workers decisions to retire has focused on the incentive effects of Social Security and employer-provided pensions. Economic theory posits that workers will decide whether an additional year of work adds enough to their retirement income to balance the loss of a year of retirement leisure. When a worker becomes eligible for a pension or Social Security, the added earnings from another year of work may seem less rewarding. Evidence on retirement timing shows that the peak age of retirement for both men and women is sixty-two, when workers first become eligible for a retired workers benefit from Social Security. A second cluster forms at age sixty-five, when full benefits for many pensions, as well as Social Security, become available. Women are slightly less likely than men to retire at these peak ages. These results hold up whether using labor-force participation or self-definition as the measure of retirement.

Some workers can gain substantially higher Social Security or other pension benefits by continuing to work past these peak retirement ages. For women especially, determining whether continuing to work is advantageous can be complicated under Social Security rules. Women can only gain from additional work if Social Security benefits based on their own work records will exceed those from their status as wives or widows. Women who are married are entitled to either a benefit based on their own work record, or to a spouse benefit, which is equal to 50 percent of their husbands benefit. If their own benefit is at or above the level of the spouse benefit, they usually gain from additional work, especially if they have been employed for less than the thirty-five years used to calculate benefits.

Based on the Health and Retirement Study, researchers estimate that about two-thirds of women will receive a benefit based on their own work record. However, a widow or widower may receive 100 percent of the deceased spouses benefit or a benefit based on their own work record, whichever is higher. Only 15 percent of these women had an earnings record equal to or higher than their husbands earning record, and thus 85 percent of women will receive a widows benefit based on their husbands earning record if they outlive their spouse. The situation of divorced women is more complicated. Women must have been married for at least ten consecutive years to the same husband to be eligible for dependent benefits. If eligible, they are entitled to benefits under the same rules as wives when their former husbands are still living, and as widows after their husbands have died.

For employer-sponsored pensions, there is considerable variation in the incentives to retire. Many pension plans depend on years of service and earnings averaged over a stated period of years. These defined benefit plans are commonly offered by government, unions, and large private employers. These plans can encourage early retirement by failing to adjust benefits upward if they are taken at older ages, or by not counting years worked beyond some maximum number in calculating benefits. One study estimated that one-quarter of the decline in mens labor-force participation between 1950 and 1985 could be explained by the extension of pension coverage (Samwick, 1998, cited in Quinn, 1999). Women are less likely than men to face such limits. In fact, because women often take time out of the labor force, many women need to work into their sixties and seventies to qualify for a pension.

However, employers are increasingly offering defined contribution pension plans, in which benefits are based on contributions made by employers and/or workers to an individual account. When the employee retires, benefits are calculated as the sum of all contributions plus interest, dividends, and capital gains (or losses). Between 1975 and 1997, the share of pension plan participants in defined contribution plans rose from 13 percent to 42 percent. Defined contribution plans do not appear to have the same disincentive effects as defined benefit plans. To the extent that defined contribution pensions continue to grow in popularity (relative to defined benefit plans), eligibility for private pensions will diminish as a factor affecting retirement decisions.

Health is another influence on the decision to retire for both women and men, but there is considerable dispute about its relative importance. Some health conditions clearly prevent work entirely, but many conditions, while making work more difficult, do not completely preclude it. For example, common aliments like arthritis may make older workers less employable long before they qualify for private or public disability benefits. In these cases, health status and the availability of retirement income may interact, decreasing the monetary gains from continuing employment while making work itself more burdensome and leisure more appealing. It has often been thought that health and disability problems at older ages primarily affect men in blue-collar jobs. However, some pink-collar jobs held by women, such as waitressing, practical nursing, and childcare, are also difficult for older people with even minor health problems.

The state of the economy has been shown to have an impact on mens retirement decisions, and it probably influences women as well. Much of the research on retirement decision-making was undertaken in the 1970s and 1980s, which saw periods of relatively high unemployment. Older workers who lose their jobs tend to remain unemployed longer than younger workers, and they are also much more likely than others their age to retire. Employers who are downsizing their workforces often offer special retirement incentives to their older and (generally most costly) workers. In periods of rapid growth, of course, new jobs are much easier to find for those who lose their jobs. When employers find it difficult to fill vacancies, they may actively recruit older workers who would not previously have been considered. Probably part of the reason that labor-force participation of workers over age fifty-five was increasing in the 1990s was due to economic growth and an increasing demand for workers of all ages.

Marital status and the retirement decisions of a spouse can also influence the timing of retirement. Some of the earliest research on womens retirement focused on unmarried women and tended to find few differences between these women and men. When researchers first began studying married women, they had to confront the possibility that couples might try to coordinate their retirement in order to enjoy leisure time together. Assuming that the husband was the primary earner, researchers expected the wifes retirement to be influenced by that of her husband. Considerable research has, in fact, shown such an effect. However, women who stayed at home to raise children and then began to work later are less likely to retire when their husbands do, and married women who will become entitled to their own pensions if they continue to work are also less likely to retire when their husbands do. Some research has shown that a wifes retirement affects when her husband retires.

Since women continue to be perceived as caregivers, the effect of the husbands health on the wifes retirement has also been investigated. Results on this issue have been mixed. Many researchers have found such an effect, but some have not. This kind of decision is probably more complex than it might first appear. There are two possibilities if a husband becomes ill or disabled: (1) the wife might quit work to care for her husband, or (2) she might continue to work and hire someone else to help with his care (as many men would do in case of a wifes poor health). The ages of the spouses when the health problem occurs, as well as the earnings potential of the healthy spouse, would be important considerations. An additional consideration would be the source of the familys health insuranceand whether the continued employment of the working spouse is necessary for continued insurance coverage. Workers who will not continue to be covered by health insurance if they should retire may be more likely to continue working.

Research on the effects of the poor health of parents and other family members is much less developed, partly due to data limitations. One recent study showed that women in their fifties who had a parent needing help with activities of daily living were more likely than others to leave the labor force. No such relationship was found for men who had a parent needing care.

Some parents have dependent children when they reach retirement age; with the trend toward later childbearing, this situation may become more common in the future. Few women have preschool children after they are in their fifties, but having school-age children is more common for these women. Parents must consider the cost of continuing to provide for these children into adulthood while still preparing for their own retirement. Having college-age dependent children has been shown to lead to delayed retirement for both women and men.

The most important influences on retirement vary considerably by race. Older African-American and Hispanic men are more likely to be unemployed or out of the labor force than white men. Older African-American women have rates of labor-force participation similar to white women, but Hispanic women are more likely to be unemployed or out of the labor market than are white or African-American women. Both African-American and Hispanic men and women are more likely to be influenced by push factors such as involuntary loss of a job or poor health. African-American and Hispanic workers are also more likely to be concentrated in low-wage occupations that are physically demanding and/or lack pension coverage.

There are a number of trends that suggest that the age of retirement may rise in the future. Americans are healthier and living longer. The shift in the proportion of the population working in manufacturing (rather than in service occupations) makes working with minor health problems feasible for more workers. The growth of defined contribution pension plans that reward employees for working longer is also an important trend. The extension of the age of eligibility for full Social Security benefits to sixty-seven, as well as the elimination of retirement incentives (including changes in the earnings test and the delayed retirement credit), may be expected to increase the average age of retirement, but the effects are expected to be small.

The state of the labor market is likely to have the most important impact on retirement. It is widely anticipated that labor shortages will develop as the large baby-boom generation reaches retirement age. In that case, some companies may offer incentives to older workers to delay retirement. Others may create attractive part-time positions for which they will recruit older adults. This scenario might not materialize, however, either due to a prolonged recession or to more rapid immigration due to increased recruitment of foreign workers by companies.

Polls indicate that well over 60 percent of workers intend to continue working past normal retirement age, with well over half citing quality of life rather than economic necessity as their reason. It is unlikely that labor force participation will increase as dramatically as these responses imply. Health, inability to find work, or other personal reasons will probably intervene in many cases. Workers citing quality-of-life reasons for delaying retirement will probably not continue to work unless they find a job they will enjoy.

An increase in Americans wealth is often cited as an important factor affecting the trend toward earlier retirement during the post World War II period. Poverty among the elderly, though still high for some groups of women (and men), decreased markedly between 1959 and 2000. In 1959 the overall poverty rate for the elderly population was 35 percent, considerably higher than the rate for the whole population. In 1999 the poverty rate among the elderly was 9.7 percent, compared with an overall poverty rate of 13.3 percent. Most of the improvement in elderly poverty came in the first fifteen years of this period. By 1979, poverty among the older population had fallen to about 15 percent (17 percent for women). Since then, the decline has been much slower. Much of the improvement can be attributed to the increase in coverage and benefits made available through improvements in Social Security.

The economic status of women and men during 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 mens 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, womens access and participation in workplace pensions continue to lag behind mens. 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.

Womens 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 workers 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 Administrations 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 womens 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.

Public policy issues

At the beginning of the twenty-first century, issues related to retirement were receiving increased political attention. The number of people reaching the peak retirement years will increase rapidly early in the century as members of the baby boom generation reach their sixties. The number of very old people is also likely to grow due to expected longevity increases for both women and men. The changes that will be needed in the Social Security and Medicare systems to insure benefits for such a large retired population is the subject of heated public debate.

Feminist economists have pointed out that many proposed changes fail to consider that the majority of Social Security and Medicare beneficiaries are women, and that women are more dependent on these forms of social insurance than men. In 1998, for example, unmarried women age sixty-five and over received about half of their retirement income from Social Security. For 25 percent of unmarried retired women, Social Security was the only source of income. It is important for the system to give careful consideration to the importance of Social Security for this group.

Many proposed changes are likely to be especially harmful for women with modest incomes. Privatization schemes usually involve large reductions in regular Social Security benefits in the hope that private accounts will make up the difference; this is risky, however, especially for small accounts with high administrative costs. Plans that maintain the current benefit structure, while making smaller cuts, sometimes favor policies such as scaling back cost-of-living increases, which would be most harmful for the oldest of the old (predominately women). Other policies that are less harmful for women and other low earners include increasing the amount of earnings subject to the payroll tax or taxing Social Security benefits like other pensions. Even a small percentage cut in all benefits would be less harmful to women than many of the other proposals being discussed.

Women are more likely than men to time retirement based on family caregiving responsibilities. Although some older men perform unpaid caregiving for family members, older women are much more likely to work in retirement as caregivers to spouses, parents, or other relatives. Advocates for women contend that policies intended to raise the ages at which most people retire from paid employment should take the needs of unpaid caregivers into account.

Women and men experience retirement differently. These differences may lessen, but are not likely to disappear, in the future. Gains in womens retirement income resulting from longer careers are also expected to be offset by the number of women entering retirement as either divorced or never married. For the foreseeable future, therefore, issues of gender are likely to remain important for studying retirement timing and the economic status of retired persons.

Lois Shaw Catherine Hill

See also Economic Well-Being; Employment of Older Workers; Pensions, Public Pensions; Pensions, History; Pensions, Plan Types and Policy Approaches; Retirement Planning; Retirement, Early Retirement Incentives; Retirement, Patterns; Savings; Social Security Administration; Social Security, History and Operations; Social Security, Long-Term Financing and Reform; Taxation.


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