A big gender gap exists in Social Security wealth because of married women’s retirement decisions, according to a new paper from the National Bureau of Economic Research.
Women tend to marry older men and to retire around the same time as their husbands even though they also live longer, on average, than men and may have had shorter careers because of childbearing.
By retiring early, the paper says, women often forego both substantial future earnings and significant amounts of prospective Social Security benefits that they would have received if they had worked longer.
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The NBER paper’s author, Nicole Maestas, compared two groups over time: the “early cohort,” born from 1936 to 1947, the oldest of which reached age 62 in 1998; and the “boomer cohort,” born from 1948 to 1959, the oldest having turned 62 in 2010.
In the early cohort, 69% of women were younger than their husbands, by an average of 2.7 years, while 63% of boomer wives were younger by an average of two years.
Maestas found that the average employment rate, lifetime number of years worked, annual earnings and hourly wages all increased from the early cohort to the boomer cohort for women ages 51 to 56. For men in their early 50s, the employment rate and the number of years worked both declined; earnings and hourly wages grew, but less so than for women.
The employment rate for married women was higher at every age from 51 to 64 for boomers relative to the early cohort. In contrast, the employment rate for boomer men was lower than for the early cohort until age 58.
For both female cohorts, real earnings increased until age 55 and began to decline at age 57, whereas men’s earnings continuously decreased from ages 51 to 61. In addition, women’s earnings increased by 31% across cohorts, compared with a 10% increase in men’s earnings.
In other words, the gender earnings gap shrinks as individuals age into retirement.
Effects of Early Retirement
For both cohorts, women were more likely than men to retire before age 62, or to move from full-time to part-time employment. In the boomer cohort, 47% of women retired or reduced work early, but only 41% of men did so.