The New Finance of Longevity

Older Women Report Facing A Financially Uncertain Future

Eleven percent of women over 70 are still in the workforce

Excerpts from the September 2020 GAO testimony before the U.S. Senate Committee On Aging reveals uncertainty about the prospects for ‘maintaining independence’ in retirement. Access the full report here.

According to our estimates from the 2019 Current Population Survey (CPS) of women 70 and older, approximately 19.7 million women in the United States are in that age range. Seventy-six percent of these women are white, 9 percent are African American, 5 percent are Asian, and 9 percent are Hispanic. About 14 percent of these women have no high school diploma, and 25 percent have a Bachelor’s degree or higher. An estimated 11 percent of women age 70 and over are still in the workforce.

Among those women age 70 and over who are still working, the three most common occupations in 2019 were (1) secretary or administrative assistant, (2) elementary or middle school teacher, and (3) retail sales supervisors and managers. Life expectancy for women who are age 65 has increased by about 6 years over the past century and women. A woman born in 2020 who reaches age 65 can expect to live to age 90.

According to the 2019 CPS, about 43 percent of women age 70 and over are married while about 57 percent are not married. Unmarried women may be at greater risk than married women of poverty in old age because they cannot pool resources with a spouse, including against the risks of job loss, illness, or disability, and therefore unmarried women may be more vulnerable to economic and financial shocks.

In addition, women who never married are also unable to take advantage of some federal benefits and other protections that are conferred through marriage, including a Social Security spousal or survivor benefit that could be larger than the benefit based on her own work history. Because women, on average, have lower earnings than men during working-age years, women will, on average, be more dependent on spousal benefits for their retirement security than men will.

Uncertainty, Fear About Meeting Future Expenses

Women in all 14 of our focus groups said they felt uncertainty or fear about meeting future expenses, suggesting a sense of fragility around retirement security. Of the 179 women who responded to our written questionnaire about whether they expect their financial situation to change, 91 reported that they expected their situation to stay about the same, 50 reported that they expected it to deteriorate, and 15 reported that they expected their financial situation to improve. Women in all our focus groups defined financial security in retirement as the ability to maintain their independence.

Some of the reasons women gave for feeling financially secure were that they had multiple sources of income, household savings and investments, home equity, money set aside for emergency expenses, or that they were
debt free or frugal. The reasons women gave for feeling financially insecure were being unable to pay for essential expenses, were in debt, lacked savings, or had to work or rely on assistance for housing or food expenses to make ends meet.

Social Security income plays an important role in helping older women achieve their goals of maintaining their independence and covering their essential expenses, according to our focus group discussions. Focus group participants discussed their perspectives on government programs, including Social Security, more than any other topic. In 11 focus groups, women specifically expressed concern about losing their Social Security or Medicare benefits, and several women described Social Security as a financial resource that helps them to maintain their lifestyle in retirement.

Ideas For Improving Personal Finance

Because women, on average, have lower earnings than men during working-age years, women will, on average, be more dependent on spousal benefits for their retirement security than men will...

Ideas for improving personal finance education for women were discussed in 12 of our focus groups and were mentioned frequently. For example, women suggested incorporating personal finance learning into school curriculums, starting as early as kindergarten and continuing through college. We asked women what they did not understand about finances when they were younger that they wish they had known. In response, some women said they faced challenges understanding how investments worked or how important employer matching policies and compound interest were to building wealth.

Women in 12 focus groups said that seeking advice from a financial advisor was a positive experience for them, but women in 10 focus groups had negative experiences, which they said included receiving poor advice, paying high fees, or becoming a victim of fraud. In a few focus groups, women noted that finding a trustworthy financial advisor can be difficult or that knowing the correct questions to ask professionals can be challenging.

The Benefits, And Constraints, of Homeownership

Homeownership, often a large portion of total assets, is a means of building wealth but can also constrain household liquidity. In our multivariate models, owning a home was associated with a 2 to 3 times higher odds of having high retirement confidence when the home does not constrain liquidity. Home equity was a larger portion of wealth for low confidence homeowners than for high confidence homeowners. Among low confidence households with older women that owned homes, equity in their primary home made up 70 percent of their household wealth, on average, compared to 39 percent of household wealth for households reporting high retirement confidence.

Most women have less income to maintain their living standards in retirement than they did when they were working, and, on average, unsurprisingly, they increasingly rely on Social Security over time in retirement as their main source of income. We estimated changes over time in two cohorts of women by analyzing longitudinal data from the Health and Retirement Study. In 2016 dollars, median household income for the younger cohort declined from $50,000 when they were 62-66, to $37,000 by the time they were 74-78. Median household income for the older cohort declined from $29,000 when they were 74-78, to $22,000 by the time they were 86-90. Median household spending declined similarly to the median household income decline.

Women generally spent their non-housing assets first, rather than selling their home (or otherwise accessing home equity). A significant decline in non-housing wealth contributed to a decline in the overall wealth of the older cohort across the age range of 74 and 90. The older cohort began at age 74-78 when 58 percent were unmarried. By the time they were 86-90, 80 percent were unmarried. These changes with age may help explain the sense of fragility around their retirement security that we heard expressed by women broadly across our focus groups.

Access the full report here.