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What Married Women Need to Know About Retirement Savings

Alli Thomas

A recent headline of an article about a study published by The Boston College’s Center for Retirement Research caught my attention.  

The headline read “Married Women Lost Most of Their Retirement Income Edge.”   

As someone who just got married earlier in the summer, you can imagine how that headline went over with me. 

On a serious note, the study found that women who have been married for most of their lives (who previously had been considered as having an “edge” on retirement preparedness over women who had either remained single or who had married and then divorced) are now in trouble.  

Before we get to the reasons for the decline in retirement preparedness of married women in the U.S., it’s important to note that the study defines retirement preparedness as having enough money to sustain one’s pre-retirement lifestyle after retiring. It is also important to understand the concept of a “replacement ratio,” or the ratio of the retirement income that could be generated by a household’s retirement resources divided by its pre-retirement income. 

The study suggests that two things are to blame for married women’s retirement-readiness challenges. 

The first is straightforward: an increase in the full retirement age (FRA) has reduced Social Security benefits for all Americans, not just married women. 

The second is a little more complex, and it has to do with changes in the calculation of Social Security benefits. More women than ever are in the workforce, which has resulted in a major decrease in the prevalence of Social Security spousal benefits.  

According to the study’s authors, when most married American women were not in the workforce, the wife who claimed benefits at age 65 was entitled to a benefit equal to 50 percent of that of her husband. So, if the replacement rate for the typical worker was 40 percent, the replacement rate for the couple would be 60 percent.  

As more married women joined the workforce, however, this calculation shifted as women became entitled to the larger of their husband’s benefit or the benefit they could earn on their own.   

There is also the question of increasing pay for women. When their paychecks were modest, women’s wages increased the couple’s pre-retirement income but did not increase the total amount the couple received from Social Security. As women’s rate of pay approached that of their husbands, the replacement rate for a married couple with two typical workers would be 40 percent.  

No matter who you are or what your marital status is, retirement preparedness should be a major focus during your working years.  

Are you on track for a successful retirement? If you need some help figuring it out, we invite you to a free, no-obligation consultation with one of our advisors. Just click here to set it up. 

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