For women, the road to retirement security has become more challenging over the course of just a few generations. As recently as the 1950s and 1960s, young women could expect to spend most of their adult lives married. Husbands worked outside the home while wives, in many cases, managed the household and child care. For retirement income, women could typically rely on spousal and survivor benefits from the Social Security program, and perhaps survivor benefits from their husband’s pension. Today the landscape looks much different. Combine the declining availability of pensions with Social Security spousal benefits that become less relevant when both spouses work, women today simply cannot look to the experience of previous generations, when more financial safeguards were in place, and assume their own retirement will work out as well financially.
Recently, the Center for Retirement Research at Boston College (CRR) used the National Retirement Risk Index (NRRI) to assess the retirement security of women in their 50s
based on their marital status. Surprisingly, it found that those most at risk are married women in two-income households. Despite the benefits of dual incomes, the NRRI found that 46% of the women in these households are at risk of being unable to maintain their standard of living in retirement, versus 32% of married women in one-income households and 39% of all single women.
One factor is the declining relevance of Social Security spousal benefits when both spouses work. Two-income households typically receive lower Social Security benefits per tax dollar paid than one-income households, due also in part to the cap on Social Security taxes. A husband earning $200,000 would pay only $8,249 in FICA Social Security taxes this year, while a couple earning $100,000 each would pay $12,400. The two-income couple may receive more benefits at retirement, but lose out on the time value of money that could be invested.
Also, married women typically save less in workplace retirment plans. According to the CRR, it is often the case that only one spouse in a two-income household saves for retirement and rarely saves additional amounts for their non-saving spouse. Ultimately, this leaves the couple with too little set aside for retirement.
Finally, about a third of the married women had been through a previous divorce, adversely impacting the economic status of their new household. In fact, CRR research shows that for households that have been through a divorce, the risk to retirement readiness is seven percentage points worse, on average, than it is for households where neither partner has been divorced.
Find more details abou the research and tips for helping married women save here.