4 Factors that Impact Retirement Security for Women  

Beyond the paycheck, gender issues affect the security of a woman’s retirement in a number of ways.  Longevity and family caregiving also impact a woman’s ability to save enough for retirement.

6 Minute Read

While most U.S. workers are facing a retirement savings deficit, for women, the effect is compounded: lower pay translates into reduced Social Security benefits, smaller pensions, and less in retirement savings.

Ever since “Rosie the Riveter,” the iconic image of the bandanna-clad working woman, walked on to the factory floor during the war years of the 1940s, the gender income gap has been a harsh reality. Though women were crucial to the war effort at that time, their pay lagged far behind that of men -- earning them no more than 50 percent of male wages.

Although significant pay discrepancies have existed between men and women from the 1940s to today, the gap has narrowed somewhat, according to a recent study done by Glassdoor. Yet women today still earn about 20 percent less -- $.79 cents on average for every $1.00 earned by men.

Compounding the effects of the pay gap, women generally live longer than men, and it’s usually the woman who takes time out of the workforce to have children or care for a loved one. What this trio of gender-specific factors adds up to is reduced retirement savings for women, i.e., less pay plus less time equals reduced Social Security benefits, pensions and retirement accounts. 

 

Just the Facts

You needn't look far to find what’s behind the four strikes against your retirement security because you were born a woman:

1. According to the latest data from the Society of Actuaries (SOA), females age 65 will live, on average, slightly more than 2 years longer than men of the same age. Although the pace of mortality improvement has slowed somewhat since 2010, overall longevity for women was 87.61 years in 2018 versus 85.6 for men.

2. The gender wage gap has a ripple effect over a woman's entire career. The National Women's Law Center finds that today women need to work nearly ten years longer than their male counterparts to make up the lifetime wage gap. For women of color, that number is even higher. These lost wages severely reduce a woman’s ability to save for retirement and pose a threat to her economic security later in life.

3. Family caregiving causes career interruptions that can have significant monetary consequences over time. Research conducted by AARP revealed that family caregivers who are at least 50 years old and leave the workforce to care for a parent will forgo, on average, $304,000 in salary and benefits over their lifetime. These estimates range from $283,716 for men to $324,044 for women.

4. Research shows that women also receive about a third less income in retirement from defined benefit pension plans and have accumulated about a third fewer assets in defined contribution retirement accounts than their male counterparts.

Progress: slow but steady

While the evidence is compelling and points out the continuing challenge women face in attaining a secure financial future, there are also signs of improvement. For instance, according to a National Institute on Retirement Security study, women are working for more years now than ever before, which helps to enhance their Social Security benefits, pension income, and retirement savings. Specifically, the study found that the workforce participation of women age 55 to 64 climbed from 53.2% in 2000 to 59.2% in 2015.

And today as many women as men participate in workplace retirement plans.

More broad-based measures, such as legislative action to eliminate the gender pay gap would go far toward leveling the playing field for women when it comes to retirement readiness, yet such policy matters are complicated and outcomes are impossible to predict.

Beating the Odds

Despite these challenges, many women retire with enough money to relax and enjoy their later years. Here's how they do it:

  • Saving as much as they can: In 2020, you can save up to $19,500 in an employer-sponsored retirement plan, plus a $6,500 "catch-up" contribution if you are age 50 or older. Your contributions are made on pretax income, which means you're paying taxes on a lower amount.
  • Becoming educated about other sources of retirement income. No matter how committed you are to saving, chances are your employer-sponsored plan won't provide all of the money you'll need once you retire. Find out as much as you can about Social Security -- and strategies for optimizing your benefits -- as well as IRAs and other investments that can help fill in the gaps.You might also consider asking your financial advisor about products that are designed to provide lifetime income.
  • Make the connection between life expectancy and income needs. Even if you already have a healthy nest egg, it's important to continue saving because you could end up spending 20 or 30 years in retirement, which means you'll have to save that much more.

Regardless of your personal challenges, you can take charge of your financial future -- starting today.

 

This information is not intended as legal or tax advice and should not be treated as such. You should contact your estate planning and/or tax professional to discuss your personal situation.  The contents in this article are being provided for educational and informational purposes only. The information and comments are not the views or opinions of Union Bank, its subsidiaries or affiliates.

 

© 2020 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

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