Planning for widowhood? Joint retirement and the allocation of pension income by older couples

Despite steady reductions in poverty among elderly Americans over the last several decades, elderly widows remain substantially more likely than married women of the same age to live in poverty. The magnitude and persistence of poverty among widows has puzzled researchers and policymakers alike. Since an elderly widow's economic status is largely determined by choices that were made before her husband's death, the relative poverty rate of widows raises the question of how couples decide when each spouse should retire, and how they decide to allocate their pension income after retirement.;The first part of this dissertation analyzes the retirement timing of married couples. I develop and estimate a structural model, in which I combine a standard lifecycle model with cooperative bargaining between spouses. The model illustrates two mechanisms through which the retirement decisions of spouses may be interrelated: leisure complementarity and unequal decision-making power. The empirical results suggest that couples with greater leisure complementarity tend to retire together, or within a few years of each other. This effect is enhanced when the wife has greater decision-making power. Because most wives are younger than their husbands, joint retirement means they retire at relatively younger ages. I conclude that this tendency toward younger retirement may increase women's risk of poverty in later widowhood, but that women choose to retire jointly because they want to, not because their husbands want them to.;The second part of this dissertation examines how couples allocate their pension income after retirement. I show that rational couples should choose single-life annuities when the husband's life-expectancy is above average, but joint-and-survivor annuities when it is below average. I find little evidence that life-expectancy matters when couples decide how to annuitize their pension income, but some evidence that when wives have greater decision-making power, joint-and-survivor annuities are more likely to be chosen.