Tip for Women: Save and Spend Like You’ll Retire at 60
Planning to work longer often runs into a harsh reality
The retirement calculator results sure look better when you plug in your plan to work well into your 60s. The longer you can avoid touching retirement savings, and delay taking Social Security, the more money there will be to support you in your 80s and 90s.
Women especially need to think about living into their 10th decade. According to the Society of Actuaries, four in 10 women age 65 who are in average health will be alive at 90. The probability of reaching 90 rises to 50% for women in excellent health.
Alas, counting on working longer is a risky strategy for women. Research from the nonpartisan Employee Benefits Research Institute (EBRI) finds that, though many women plan to work longer, the reality is that they often retire far earlier than anticipated:
—Overall, while just 32% of women in a 2020 survey reported it was their intention to retire before age 60, more than six in 10 said they in fact retired before 60. More than half of women said that they had expected to retire between ages 63 and 70; only 38% made it to their goal.
—Retiring earlier than expected was most pronounced for divorced women in the EBRI survey. Just 14% of divorced women had expected to retire before age 60, but 70% did.
Other surveys have reported that when people retire earlier than expected it is rarely because they had the financial security to move up their retirement. Typically it is because of a health issue or job loss.
On the health front, for women that can be their health, or the decision to stop working to become a full-time caregiver to someone who needs help. What is an irrefutably nurturing decision nonetheless can end up coming at the huge cost to retirement security given foregone wages, raises, both of which negatively impact one’s eventual Social Security benefit, and a pension benefit, if that is available.
The current recession is the latest reminder that older workers tend to be a favorite target when layoffs hit. According to the Bureau of Labor Statistics, in September the unemployment rate for women at least 55 years old was 7.2% compared to 6.3% for men at least 55. At the height of the COVID unemployment crisis in April, when the national rate spiked to 13.6%, the unemployment rate for men at least 55 years old rose to 12.1%, and for women at least 55 the rate was 15.5%.
Even when older workers find new work, research from the nonpartisan Urban Institute and Pro Publica finds that it is typically at a lower salary.
That’s an argument for saving more in your 40s and 50s.
The more you save right now, the easier it will be to absorb employment risk in your 60s. If you are laid off before you anticipated, or want to step off the work accelerator, you are lessening the pressure you will face.
And by finding the means to save more now, you give yourself the power to make the choice: Keep working into your late 60s or retire earlier on your terms.
For married women, it’s also worth thinking hard about a common retirement move: stopping work when your husband does. Given that husbands are typically a few years older, that can mean that women are effectively stopping work — and stopping saving — at a younger age.
If you’re still in your peak earnings years (or close), continuing to work can have a big impact on your eventual Social Security benefit, especially if you took time off to raise a family. Social Security is calculated on your highest 35 years of earnings. If you have yet to hit 35 years, working longer will help. Or, if you’ve worked 35 years but your current earnings are higher than your inflation-adjusted earnings from prior years, continuing to work means you will add a higher-income year to your Social Security record. And that means an eventual payout that is higher.