Those who fall prey to these later problems often have meager safety nets on which to draw if they have to stop work close to retirement, asserted researchers in a new report, “How Secure are Retirement Nest Eggs?” issued by the Center for Retirement Research at Boston College.
“Health problems, job losses, widowhood, and divorce in the years immediately prior to retirement can rob people of financial security later,” wrote authors Richard Johnson, Gordon Mermin, and Cori Uccello. ” Workers need to consider these risks as they develop their retirement plans. Those who wait until their 50s to begin saving seriously, as many do, may find it too late to protect themselves against unexpected setbacks and the financial consequences.”
According to the report, the time when life disasters often strike is the period when many people are at their peak earning potential and are often free of earlier financial responsibilities such as putting children through school.
” The value of future retirement benefits paid to workers in traditional employer pension plans also tends to grow rapidly for those in their 50s, because benefits are typically tied to years of service and salary earned near the end of the career,” according to the report. “Further, working late into one’s 50s generally maximizes future Social Security benefits, which are based on earnings received in the 35 highest-earning years.”
All in all, to have a disaster strike at this late point can have a major impact on household bank accounts. Estimates show that health problems, job layoffs, and marital dissolution in late mid-life significantly reduce household wealth. For example, the onset of work disabilities among people in their 50s and 60s reduces wealth by 42% for single people and 16% for married people, holding constant such other personal characteristics as education, race, gender, age, and baseline health status, the researchers found.
Meanwhile, according to the report, the onset of medical conditions that do not necessarily limit work has smaller but still significant effects, reducing household wealth by 23% for single people and 17% for married people. Job layoffs shrink wealth by 33% for single people and 21% for married people. Health problems and job loss are especially serious for single people, because they cannot fall back on the economic resources of their spouses when adversity strikes, the report said.
Demographically, t he greatest difference among Americans in the potential effects of the major life problems is in the incidence of severe disabilities; married black people and Hispanics are more than twice as likely as married whites to develop limitations in bathing, dressing, or eating, the report said.
Married black people are also significantly more likely to receive new diagnoses of major medical conditions, especially diabetes, than married whites, and are more likely to become widowed.
Meanwhile, the researchers said married men are just as likely as married women to experience some type of negative shock in late mid-life, but women are more likely to become widowed or severely disabled. For example, 15% of married women age 51 to 61 become widowed over a 10-year period, compared with only 5% of married men. Married men, however, are more likely to develop medical conditions than married women. Over a 10-year period, 45% of married men ages 51 to 61 are diagnosed with major medical conditions, compared with 36% of married women.
Gender differences are especially dramatic for heart problems, which begin to afflict 20% of men but only 12% of women. Layoff rates are also higher for men than for women. There are no significant gender differences among unmarried people in the likelihood of experiencing health problems or job layoffs in late midlife, the researchers found.
The full report is here .