Retirement-age women who have new grandchildren are nine percent more likely to retire early than those who do not, according to a new study. In fact, this increased probability of early retirement due to new grandchildren is similar to the number of women that retire due to poor health.
Making the decision to retire early has a significant impact on income adequacy later in life as it can result in lower IRA, Social Security, and pension benefit amounts.
The study, co-authored by Robin Lumsdaine, Ph.D., of the Kogod School of Business at American University in Washington, D.C., investigated the retirement choices made by more than 47,400 retirement-age women. The findings revealed that many women retire early to care for their grandchildren.
According to financial planners, early retirement may be especially difficult for women, who often have had both lower earnings and fewer years in the labor force than men. Consequently, they also tend to receive lower income during their retirement years.
The new findings shed light on specific issues for policymakers to consider as they begin to tackle the challenges of the aging baby-boomer population. As reported in a recent Bloomberg article, the large Baby Boom generation puts a big strain on the budgets of Social Security, Medicare, and other retirement programs. One way to lower costs is to require Americans to work longer before getting those benefits.
In the case of new grandmothers, however, policies aimed at extending the years spent working may have little effect if retirement decisions are mainly driven by family considerations such as the arrival of a new baby.
Instead, policies that target the child care needs of younger generations could help reduce care demands on those of retirement age, and therefore help keep the older generation in the workforce longer, according to the researchers.
Furthermore, the researchers add that women who have access to flexible work arrangements (such as reducing the number of hours they work) are less likely to retire, indicating a desire to continue working. It is still unclear as to whether most new grandmothers retire early to care for their grandchildren out of necessity or out of choice, Lumsdaine said.
Lumsdaine’s study also supports earlier research findings that financial matters such as access to pension benefits and health insurance are strong influencers in the decision to retire.
The research is published in the journal Demography.
Source: American University