Cohort Changes in the Retirement Resources of Older Women

Article excerpt

Summary

Dramatic changes in life expectancy, women's roles in the labor market, the structure of the workforce, and pension systems have occurred in recent decades, all influencing the well-being of future retirees. This article uses different sources of U.S. data to focus on the retirement resources of women aged 55-64. By comparing the resources for this age group in 2004 to their counterparts in 1994 and 1984, this analysis provides some indication of changes in the retirement preparedness of three different cohorts of women. Our findings indicate that notable changes have occurred with women's pathways into retirement that are due to increased education and lifetime work experience. As a consequence, there are marked differences in potential retirement outcomes. We find that women aged 55-64 today are better prepared in several respects than their counterparts of the same age 10 or 20 years ago.

Introduction

As the war babies and the leading edge of the baby boom approach retirement age, dramatic changes in the last half of the twentieth century have made it difficult to discern how people born during these eras will fare in retirement. Not only have the resources available to current preretirees changed, but so have the demographic characteristics of this group. Some guidance on how the future retirees will fare can come from comparisons with those who came before-in effect, a foreshadowing of what the aged will look like in the twenty-first century.

Because of interest in changing retirement risks, the Federal Interagency Forum on Aging-Related Statistics (the Forum)1 decided to bring information together on Americans aged 55-64 and the extent to which their retirement resources are changing. This study focuses on the dynamics of women's economic resources that comprise retirement income and the availability of employer-provided insurance against health risks at older ages. By comparing measures of well-being for this age group in 2004 to their counterparts in 1994 and in 1984, the article explores the preparedness of the current cohort with their counterparts from earlier birth cohorts at similar stages in the life cycle. Although many pre-retirees in 2004 were born just before the baby boom, change indictors of well-being for this group are suggestive for retirees in the near term and the coming baby boom.

The last half of the twentieth century witnessed dramatic and fundamental changes that will influence the coming war babies and the baby boomers in retirement (Farley 1996; Henretta and O'Rand 1999; Society of Actuaries 2006; Butrica, Iams, and Smith 2003; Goldin 2006). Fundamental shifts occurred in marital patterns and fertility rates. Baby boomers experienced relatively older ages of first marriage, higher divorce rates, and multiple marriages, coupled with relatively low fertility rates compared with their parents' generation. Longevity increased over the period as indicated by increasing life expectancy overall and among those aged 65 or older. To maintain current levels of consumption at older ages, an increased life expectancy must be paid for either through increased savings, increased pension benefits, or a delayed transition to full retirement. Perhaps the greatest changes occurred in women's roles in the labor market in the 1970s and continue today. Goldin (2006) defines this "quiet revolution" as changing horizons among women to include a lifetime of employment, shifting identities from home and family toward economic independence, and increasing job experience and earnings capacity. These changes have fundamentally altered the occupations and lifetime earnings of women.

In addition to the changes in women's roles in the labor market, the nature of work and the employer/employee relationship have changed greatly during this 30-year period. The economy has shifted from a manufacturing base toward services, and there is greater global competition. Employer costs and liabilities from traditional retirement-age support, such as defined-benefit pensions and retiree health insurance, have grown. …

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