Future of Ageing 2015 series

By: Luis Recuenco, Social Gerontologist

During the greater part of the 20th century there was only one deciding factor for couples facing retirement: the husband’s circumstances. The spectacular increase of women participating in the labour market within the last decades implies that many more couples, with long work histories, from which both are entitled to pensions, are reaching retirement age.

Given that both spouses contribute to household income, two retirement decisions must be made. Taking into consideration their preferences and circumstances.

Literature manifests that retirement decisions are conditioned by family contexts and that a significant number of couples wish to retire jointly, or at least retire at the same time. Couples who maintain satisfactory relationships are interested in joint retirement so as to be able to share free leisure time. But in many cases these future expectations are impossible to fulfil. In Canada approximately 50% of couples are interested in joint retirement but only a third of them end up managing to do so, in contrast to the United States where 45% do manage it. In a research that I carried out using SHARE data it was shown that in Central European countries (Belgium and Germany) 37% of couples retired jointly, with 36% in Southern European countries (Spain, Greece and Italy) and 48% in Northern European countries (Sweden and Denmark).

The European Union is reforming their pension systems so as to counterbalance ageing populations by increasing statutory retirement ages and extending the period of contribution.   These changes mean that workers’ retirement ages will be postponed. Therefore, it is necessary to know whether couples who retire jointly will postpone or bring forward their retirement. In the abovementioned seven countries, when couples retire jointly, the men postpone their retirement by one year while the women increase it by over two years. This data is very significant as an increase in one or two years, on average, of retirement in a country could represent one or two points less of pension expenditure with respect to GDP.

Which variables hinder joint retirement? Amongst the factors hindering couples’ joint retirement we find health problems, family obligations or financial circumstances such as job loss or pension eligibility.  Age difference between spouses always appears as a determining factor in retirement whether it be joint or separate. The older a husband is with respect to his wife means that there is less chance that both will retire jointly. In patriarchal societies like those of the European Union, men marry or form couples with younger women. According to SHARE data men in Germany and Belgium are two years older than their partners, while in Sweden and Denmark the difference is two and a half years and almost four years in Spain, Greece and Italy.

Given that in the majority of EU countries statutory retirement age is the same (65 years old, although this is increasing progressively) for both men and women and that the men are older than the women then the couples who desire joint retirement have two alternatives:  1) If the man retires at the statutory retirement age (65) then the woman must take early retirement and subsequently reduce her pension and the total income of the household 2) If the woman retires at 65 years old then the man must postpone his retirement age and the total income of the household will increase.

With respect to the above mentioned alternatives what changes could be introduced in pension systems to facilitate joint retirement? Given that men are more integrated in the labour market than women and that women have shorter and more discontinued work careers, it would be more sensible to financially incentivize men to postpone their retirement in a voluntary and flexible manner. In the USA as well as in Spain workers receive a supplement to their pension for every additional year worked after statutory retirement age. These financial incentives would be a good mechanism for facilitating joint retirement to many more couples thereby allowing an increase in average retirement age for both men and women and making pensions systems more sustainable.