How Family Ties Shape Retirement Success

Advice on planning for later years needs to reflect different marriage and living arrangements.

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The requirements for successful retirements are, of course, simple to map out: Begin saving earlier in life, set aside larger percentages of your pay, invest wisely in low-cost funds, avoid debt, pay off your mortgage, defer Social Security to boost payouts, and work past traditional retirement age to make sure you don't run out of money. Stay healthy, too, so your medical expenses don't eat you alive. We might as well complete this fairy tale by advising you to make sure you find a job with a traditional pension, and to only work for employers with AAA credit ratings and great health insurance.

[See 12 Ways to Increase Your Social Security Payments.]

Practical retirement advice needs to include the fact that we live in the real world and have diverse needs and challenges. One factor that contributes to large differences in retirement planning and needs is a person's family situation. MetLife's Mature Market Institute, in partnership with the Society of Actuaries, recently studied how retirements are shaped by different family structures.

The recession has accelerated the splintering of the classic American family—two parents and children living under one roof. Multigenerational households have become much more common. So has living alone, as more than 31 million of us were doing in 2010. Meanwhile, as MetLife's "The New American Family" study notes, the 2010 Census found that only 48 percent of the nation's households included married couples—the smallest percentage since family data collection began in 1940. 

Along with the growing diversity of marital and living arrangements, the study also found "many differences in retirement planning and financial security based on family structure." More than 2,500 adults, ages 45 to 80, were interviewed for the study and identified as belonging to six types of family units: first marriages, second marriages, domestic partnerships, people who were divorced or separated, widowed individuals, and single people who had never married.

[See How to Make Multigenerational Living Work.]

"Despite a larger and more complex household, couples are better prepared financially than non-couples," researchers concluded. "Having children has an impact on retirement preparedness as well as on the risks people face in retirement and how they will address them." 

Among all people interviewed, there were substantial differences in perceptions of retirement adequacy:

Already achieved: 13 percent

On track: 15 percent

Somewhat behind: 16 percent

Significantly behind: 24 percent

Haven't yet started: 10 percent

Don't have any goals: 22 percent

Differing family structures had a big impact on financial preparedness, the study said. "More couples (34 percent) have achieved or are on track for achieving their retirement savings goals than non-couples (21 percent)," it said. "Singles are the least prepared for retirement, with the highest percentage of those who say they have not started their retirement savings yet (20 percent), and a considerable number of them do not even have any goals set (27 percent)."

Beyond retirement planning basics, MetLife and the Society of Actuaries identified retirement priorities that are shaped by the presence or absence of a spouse and children. Those living alone generally have less margin for error in retirement planning than couples and may need to spend more time building support networks to compensate.

[See 22 Ideas for Better Retirements for Women.]

For people with partners and children, the study advised, the presence of other people in the family structure may have a significant impact on retirement decisions. Considerations include:

• Recognizing the impact of supporting others when making retirement planning decisions. This especially applies to those who have children. 

• Factoring in the ability to maintain their lifestyle and security after the loss of a spouse.

• Keeping in mind the potential impact that supporting other family members has on their own retirement.

• For those who have had multiple marriages, ensuring legal documents are in place to define obligations and resource ownership, considering both previous and current spouses and children from both marriages. 

• For non-married partners, recognizing that they may not have the same rights with employee benefits and legal entitlements as married couples. They are treated differently than married couples when it comes to Social Security and Medicare. They may need to seek legal advice on documents that will protect themselves, their partners, and other family members. Domestic partners have access to some kinds of benefits and rights, and not to others. This can vary by employer and state.

• For widows, understanding the availability of family members to offer various types of support and maintaining an appropriate network for support if family members are not readily available.