I Do … Want to Save: Marriage and Retirement Savings in Young Households

Increased policy and academic attention has been placed on promoting retirement savings early in the life course. This study investigates the extent to which retirement savings behavior among young persons, a population for which retirement savings is important but typically low, differs by marital status. We draw national survey data on young adult households (ages 22–35; N = 3,894) from the U.S. Federal Reserve Board's Survey of Consumer Finances (SCF). Results reveal considerable differences by marital status. Controlling for important characteristics, young adults who were married were more likely than all other groups (including cohabitors) to perceive retirement as an important savings goal and to have an individual retirement account. Married persons were more likely than their single counterparts to participate in a defined contribution pension plan. Single women fared particularly poorly on retirement savings outcomes. A range of possible theoretical links between marriage and retirement savings at young adulthood are discussed.     

Women and pensions: a decade of progress?

This Issue Brief compares changes from 1989 to 1998 in pension participation, accumulation, and allocation for employed women, versus employed men, ages 18-62. In addition, it provides an estimate of the gender "pension gap" in defined contribution accumulations, contrasts this with the gender "earnings gap," and provides explanations for these differences. Between 1989 and 1998, the percentage of employed women with a pension or retirement plan at their current job increased from 43 percent to 45 percent, compared with a decline from 53 percent to 52 percent for employed men. For both women and men, the percentage with defined contribution retirement plans increased dramatically, while the percentage with defined benefit pension plans dropped sharply. Between 1989 and 1998, the ratio of women's to men's defined contribution plan accumulations increased from 40 percent to 44 percent, indicating a narrowing of the gender pension gap. However, the narrowing was concentrated among the cohort ages 45-53 in 1998. The gender pension gap increased for women in other age groups. Gender differences in defined contribution plan accumulations can be attributed to differences in earnings and job characteristics. Between 1989 and 1998, for workers with defined contribution plans, the ratio of women's to men's earnings remained unchanged at 57 percent. Employed women with defined contribution plans are more than twice as likely to earn less than $25,000 per year than employed men with defined contribution plans, but almost five times less likely to earn more than $100,000 per year. From 1989 to 1998, the percentage of employed men with defined contribution balances invested mostly in low-risk, low-return assets declined much more than the percentage of employed women who followed that investment strategy. Whereas the percentages of men and women with retirement plans invested mostly in bonds were nearly equal at 31 percent and 32 percent in 1989, respectively, by 1998, 20 percent of women (compared with 14 percent of men) had their retirement plans invested mostly in bonds. The trend toward defined contribution plans and riskier retirement portfolios has resulted in significant wealth accumulation over the decade. In real terms, both men and women have greater retirement plan wealth, but increases have been larger for men than for women. Since there is no evidence that plan provisions vary by gender, improvements in the gender pension gap will come only with changes in women's labor force experience and investment decision-making.     

Sources of information and portfolio allocation

This research investigates the relationship between how a household receives financial information and the degree to which investment portfolios are diversified. Diversification is measured as allocation across asset classes and share of assets held in each asset class. Propensity score-based techniques incorporating stratification and weighting are employed to better isolate causal links, while also controlling for objective and subjective financial literacy and overconfidence. Results indicate that the use of financial planners and brokers is associated with an increase in asset class diversification. Households that consult with financial planners and bankers allocate their wealth systematically different from those who do not. These results highlight the role that financial professionals play in helping households make investment decisions.     

Marriage and the Allocation of Assets in Women’s Defined Contribution Plans

The goal of this paper is to understand the effect of family decision-making on the investment decisions of married men and women. Using data from the Survey of Consumer Finances, we investigate how the spouse’s relative control over financial resources in the household and the life-cycle stage affect the investment choices of married women and men. The results show that married women who have more control over the financial resources are less likely to invest their Defined Contribution Plans (DCPs) in risky assets. Also, women who are married to relatively older men are less likely to take on risk with their DCPs. There is little evidence that the wife’s characteristics affect the investment decisions of married men.     

RACIAL INEQUALITY IN MEN'S EMPLOYMENT AND RETIREMENT EARNINGS

Data from the New Beneficiary Study for currently married men who began receiving social security benefits in 1980–1981 indicate that the racial earnings gap is greater in retirement than it was in employment. Racial differences in employment and pension earnings are specified by education and employment status. There is, however, a significant net racial effect in predicting social security earnings. Furthermore, education interacts with race in predicting asset earnings, which constitute the major source of racial inequality in retirement. This analysis highlights not only the enduring problem of poverty for African Americans and Latinos who are "working off the books,' without social security benefits, but also the possibility of a "glass ceiling' that limits access to assets for highly educated nonwhites.     

Marriage,Marital History,and Black – White Wealth Differentials Among Older Women

This study investigated the impact of union history and marital transitions on wealth inequality between older Black and White women (N = 7,026). Cohort data from the Health and Retirement Study show large and increasing Black – White differences in wealth. Marital and relationship histories are associated with the wealth accumulation process among older women. Women who married and stay married accumulated levels of wealth that exceeded those of other women with disrupted family lives. The marriage – wealth nexus is sensitive to a woman's position in the wealth distribution. Quantile regression results revealed that racial differences in total wealth holdings between Black and White women exist throughout the wealth distribution, whereas the relationship between current union history and wealth differentials is significant at the lower tail and middle of the distribution. Decomposition analyses highlighted the nontrivial role of racial disparities in marital histories in accounting for the racial wealth gap. As members of the baby boom generation enter their retirement years, it will be more important than ever to monitor the wealth accumulation process among older single and racial/ethnic minority women.     

Decision Making Clusters in Retirement Savings: Gender Differences Dominate

This study explored the impact of demographic factors on individuals’ investment choice decisions in retirement savings funds. Analysis found identifiable member clusters across a large and diverse sample of almost 150,000 transactions. Results suggested that gender and risk are the most dominant factors with women showing a strong tendency to make lower risk investment choices. If this behavioural tendency is not addressed through education it will accentuate the hurdles women already face in accumulating adequate saving for retirement.     

Aging With Rising Risk: Have Older Households Experienced Faster-Growing Risk Exposure Than Younger Ones Since the 1990s?

Financial markets have been characterized by boom and bust cycles since the 1980s, while the responsibility for managing retirement wealth has increasingly shifted onto individual households at the same time. Policy makers and experts have expressed concern over rising risk exposure among older householders, who appear to be increasingly exposed to the growing financial risks just as they near retirement. We consider household data from the Federal Reserve’s Survey of Consumer Finances from 1989 to 2010 to analyze the correlation between age and risk exposure. We test whether older householders’ risk exposure has indeed grown over time, whether it has increased more than that of younger householders, whether changes in the demographic composition of older householders have contributed to older households’ rising risk exposure, and the degree to which increases in risk exposure can be traced to a growing concentration of household assets held in stocks and housing and to rising householder indebtedness. Our results indicate that risk exposure has grown more for older householders than for younger ones, that demographic changes among older householders have contributed to additional increases in older householders’ risk exposure, and that the growth of older householders’ risk exposure is driven more by rising risky asset concentration and less by greater indebtedness.     

Sexual orientation and household financial decisions: evidence from couples in the United States

We analyze how sexual orientation is related to household financial decisions using 2000 US Census data, and find that lesbian couples pay higher annual mortgages relative to house value than do heterosexual or gay couples. We also estimate that cohabiting heterosexuals pay more than their married counterparts. We link this homosexual-specific differential to homeowners’ propensity to save. This differential reflects the gender composition of same-sex households, and their very low fertility, in addition to the precautionary motives increasing cohabiting couples’ propensity to save relative to married ones. Evidence from retirement and social security income of older couples exhibits the same pattern of differentials by sexual orientation and cohabiting status.     

Women’s Household Preparation for Retirement at Young and Mid-Adulthood: Differences by Children and Marital Status

There are increasing concerns about whether Americans are saving enough for retirement. Recent research has called for improved understanding of the relationship between family structure and economic preparation for retirement at earlier stages of the life course. Using multiple years of the Federal Reserve Board’s Survey of Consumer Finances, we examined how number of children and marital status were associated with women’s household retirement savings at young and mid-adulthood. Several household-level indicators of retirement preparation were considered: desire to save for retirement, retirement account ownership, eligibility to participate in a defined-contribution plan, participation in defined-contribution plans, and retirement account wealth. Results from regression analyses revealed variation in women’s household financial preparation for retirement at young and mid-adulthood by family context. Additional children were negatively associated with several measures of retirement preparation among single-female households but not for couple households. Overall, we found that low economic preparation for retirement is an additional economic disadvantage facing single mothers at young and mid-adulthood, with potentially long-term implications for their financial security. The results shed light on linkages between family structure and women’s economic status.     

Retirement Intentions of Same-Sex Couples

Summary

Retirement intentions of same-sex and opposite-sex couples were investigated. Data were drawn from the Cornell Couples and Careers Study. The sample consists of 32 women in same-sex relationships, 7 men in same-sex relationships, 30 men and women in cohabiting relationships, and 30 married men and women. Participants' responses to such questions as age expected to retire, age they began retirement planning, degree of financial planning for retirement, degree of preparation for housing and healthcare, and plans for post-retirement work and volunteering were analyzed. Female same-sex couples self-rate on financial planning for retirement to a significantly lower degree than married couples. The implications for post-retirement well-being and the need for financial planning are discussed.     

A post-crisis assessment of retirement income adequacy for Baby Boomers and Gen Xers

DETERMINING THOSE "AT RISK" OF INSUFFICIENT RETIREMENT INCOME: The analysis in this paper was designed to answer two questions: 1) What percentage of U.S. households became "at risk" of insufficient retirement income as a result of the financial market and real estate crisis in 2008 and 2009? 2) Of those who are at risk, what additional savings do they need to make each year until retirement age to make up for their losses from the crisis? The results are from the 2010 EBRI Retirement Security Projection Model by the Employee Benefit Research Institute. KEY FINDINGS: Range at risk: The percentage of households that would not have been "at risk" without the 2008-2009 crisis but that ended up "at risk" varies from a low of 3.8 percent to a high of 14.3 percent. 50-50 chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 50 percent probability of retirement income adequacy would be 3.0 percent of compensation each year until retirement age to account for the financial and housing market crisis in 2008 and 2009. 90 percent chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 90 percent probability of retirement income adequacy would be 4.3 percent of compensation. Range of adequacy: Looking only at Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), that had account balances in defined contribution plans and IRAs as well as exposure to the real estate crisis in 2008 and 2009 shows a median percentage for of 5.6 percent for a 50 percent probability and 6.7 percent for a 90 percent probability of retirement income adequacy.     

Cohort Differences in Joint Retirement: Evidence from the Health and Retirement Study

The dramatic rise and sustained participation of recent cohorts of women in the labor force has coincided with their increased attachment to the labor market. In this paper we use twelve waves of the Health and Retirement Study (1992-2014) and investigate how married couples belonging to more recent birth cohorts compare with their predecessors in terms of coordinating their retirement decisions. Using a multinomial logit model we estimate the labor force dynamics of dual-earner married couples and find that couples with wives belonging to more recent birth cohorts are less likely to jointly exit the labor force. Further, this declining cohort trend in joint retirement can only partially be explained by commonly observed socio-economic, employment, and health related factors that affect retirement decisions, suggesting an important role for cohort changes in preferences and social norms such as preference for work and attitudes toward gender roles.     

What motivates single women to save? the case of Japan

Using Japanese panel data, we analyze precautionary savings due to staying single in the presence of income uncertainty. Our panel analysis finds that compared with young women who are likely to get married within 3 years, those who are not plan to have 44 percent more savings for precautionary purposes, and 108 percent more for retirement. These results suggest that in facing higher risk of income fluctuation due to choosing to marry late or remain unmarried, young women intend to have more wealth to mitigate the income risk inherent in single life.     

Earnings and Expenditures on Household Services in Married and Cohabiting Unions

Despite the rise in women’s paid employment, little is known about how women and their partners allocate money to outsource domestic tasks, especially in unmarried unions. Tobit analyses of 6,170 married and cohabiting couples in the 1998 Consumer Expenditure Survey test hypotheses that recognize gender inequality between partners, gender typing of household tasks, and differences between cohabitation and marriage. Women’s earned income is more important than men’s for spending on female tasks. Men’s earnings are not more important for male tasks, but the earnings of married men are more strongly linked to expenditures on female tasks than are the earnings of cohabiting men. The research indicates that working women leverage their earnings to reduce their domestic burden through outsourcing.     

Quality of marriage: a comparison between golden wedding couples and couples married less than fifty years

The quality of marriage is investigated for a sample of 79 couples living in a midwestern comprehensive retirement community. These 158 older, middle-class men and women are healthy and average 74.8 years of age. Marital length averages 41 years, and 34.8 percent have celebrated their fiftieth wedding anniversary. Marital quality, morale, and sexual behavior are not significantly different for golden wedding couples than for couples married less than 50 years. Couples married less than 50 years spend more time socializing with other couples each week than do those who have passed the 50 year mark; they also have higher levels of sexual interest, and are more likely to have been previously married. All of these couples are happily married, have high morale, and most are still sexually active (62.8 percent).     

Financial Risk Attitude and Behavior: Do Planners Help Increase Consistency?

This study is the first to evaluate the effect of sources of information on households’ consistency between their risk attitude when making savings and investment decisions and risk behavior displayed when they do save and invest. As the responsibility is being shifted to individuals to save for their own financial future, it is important that individuals and households save and invest in a manner that is consistent with their financial risk tolerance. Financial planners were found to provide significant value to households on the consistency of their financial risk attitude and behavior. The implications of this work are far-reaching in the financial planning arena.     

Gender Differences in Job Challenge: A Matter of Task Allocation

Challenging job experiences are considered important prerequisites for management development and career success. Several researchers have suggested that women are given fewer challenging assignments than their male colleagues. To test this idea we performed two studies. The first examined possible gender differences in challenging job experiences at middle job levels. The results indicated that female employees had fewer challenging experiences in their jobs than their male counterparts. The second explored the proposition that differential assignment of challenging tasks to male and female subordinates underlies gender differences in job challenge. The results indeed suggest that supervisors' task allocation decisions are not gender‐blind and may result in women having fewer challenging job experiences than men.     

Expenditure Flows Near Widowhood

Using data from the 1980–2001 Consumer Expenditure Surveys, we investigate how impending widowhood affects households’ expenditure patterns. We find that total annual expenditures are $4,027 higher for about-to-be-widowed households compared to otherwise comparable continuously married couples. Within subcategories, expenditures average $4,108 higher for the miscellaneous subcategory which includes expenditures on funerals/burials. We conclude that differences in the needs-adjusted incomes of married and widowed households may be partly a function of pre-widowhood differences in their expenditure patterns that lead about-to-be-widowhood households to draw down on financial wealth.     

Cohabitation and U.S. Adult Mortality: An Examination by Gender and Race

This study is the first to explore the relationship between cohabitation and U.S. adult mortality using a nationally representative sample. Using data from the National Health Interview Survey‐Longitudinal Mortality Follow‐up files 1997–2004 (N = 193,851), the authors found that divorced, widowed, and never‐married White men had higher mortality rates than cohabiting White men, and never‐married Black men had higher mortality rates than cohabiting Black men. In contrast, the mortality rates of nonmarried White and Black women were not different from those of their cohabiting counterparts. The results also revealed that mortality rates of married White men and women were lower than their cohabiting counterparts and that these mortality differences tended to decrease with age. The authors found no significant mortality differences when they compared married Black men or women to their cohabiting counterparts. The identified mortality differences were partially—but not fully—explained by income, psychological, or health behavior differences across groups.