Young adults are not leaving home these days, or they are boomeranging back, as many parents well know. Indeed, the successful launch of the young is occurring later and later, according to Stephen Sweet of Ithaca College and the Center on Aging & Work at Boston College; it is not uncommon for children to remain dependent on Mom and Dad into their 30s. Combine this with the fact that first births to women are also occurring at later ages, and growing numbers of women may not face an empty nest until they are in their late 60s or early 70s -- well beyond today's average retirement age. This raises questions about just when and how well those mothers -- and fathers -- will be able to save for retirement.
Women's labor force participation rates and work experiences have always had an impact on well-being in retirement. Historically, women were largely dependent on their husbands for support in old age because relatively few participated in the labor force. Women today are far more likely than their mothers and grandmothers to work outside the home, but they are still less likely than men with children to do so. If they have paid jobs, women with children typically work fewer hours, have more work interruptions, and earn less than men. Their employment patterns and earnings, especially when coupled with the high cost of rearing children, can make it difficult to set aside money for their own retirement.
Time out of the labor force is not credited toward Social Security; nor does it result in contributions to a 401(k) or other work-related retirement plan. Part-time workers are covered by Social Security, but benefits based on part-time hours will be lower than those for full-time workers. Most part-time workers are not covered by a pension plans. Moreover, women tend to invest more conservatively than men. This may be a good thing when the market is on a downward slide, but it can leave accumulations far behind when the market is bullish. The upshot is that many women reach their 60s with inadequate resources to carry them comfortably through a long period of retirement, despite years of juggling the responsibilities of family care and paid work.
Many of these women -- and the still small, but growing percentage of men who engage in full-time child care -- may view working longer as their savings plan. Labor force participation rates in the so-called "retirement years" have risen sharply in the past twenty years or so, more for women than men. The latest employment statistics from the Bureau of Labor Statistics show that over 27 percent of women ages 65 to 69 were in the labor force in May, up 80 percent since May 1993; the participation rate has nearly doubled for women in their early 70s.
Economic turbulence, demand for workers with a college educations, and rising education costs have combined to create significant financial challenges for older workers, says Professor Sweet, an issue presented in his book Changing Contours of Work. Adult children of today's older workers enter the labor force with insecure footing and massive debt. As a consequence, today's older workers labor not only for the sake of their own financial security in retirement, they also do so to help establish the security of their adult children, who are much more likely to remain financially dependent for far longer as compared to prior times.
Working longer is a good strategy to aim for. Each additional year of employment means more time to save, contribute to a 401(k) if available and perhaps get an employer match, generate returns on savings, and beef up one's Social Security earnings history. A Congressional Budget Office analysis suggests that working until age 70 and delaying Social Security could make up for much of the retirement savings deficit in the United States. Yet women who are near 70 or older when they see their last child off could well have to work even later in life if they have failed to save much during their child-rearing years. But health problems, unemployment, and elder care responsibilities can throw a wrench into the best-laid employment plans.
Just as parents are saving for their children's future, they should be pondering their own future as well, including how they will finance retirement. This is not an issue solely for women who have children late in life; it is an issue for everyone. It may, however, resonate more with these women because of the difficulties they face in managing paid work and family responsibilities. Many of them will spend considerable time out of the labor force or not fully engaged in it. Where they will be at age 65 or 70 should be part of their calculus early on, especially if the kids are staying at home much longer than they once did.