Pay Gap Means Retirement Gap

Here's Why Women Have a Harder Time Saving Enough For Retirement

by Don Graves

Financial Frequency. mySavings

June 7, 2019 .3 min read

5 Reasons Women Need to Save More for Retirement than Men:

  1. Women Live Longer than Men
  2. Women May Spend Fewer Years in the Workforce
  3. Women Earn Less than Men
  4. Women Tend to Be More Conservative with Their Money
  5. Women Often End Up Being Caregivers

Did you know that only one-third of women believe they are on track for planning and saving for retirement? And did you know that women typically show lower levels of financial literacy and are three times more likely than men to report that they could not afford to save for retirement?

These are just some of the many startling facts that prove that the conversation and approach towards women and retirement should be different and considerably more active. This holds especially true when it comes to retirement income planning.

To further ingrain the idea that the dialog around women and retirement needs to be a more active one, here are some more general findings:

Women Typically Live Longer than Men

Did you know that the average American male can expect to live roughly 76 years, while the average American female can up to 81 years?

To put things in better perspective, let's talk income.

Let's say Jon (male) and Samantha (female) are both earning a $70k salary as an Account Manager at XX company and both have plans to retire at the age of 67.

If we went with the average life expectancy of both male and female, Jon would need to support himself for roughly ten more years while Samantha would need enough money to support herself for fourteen years.

What does that mean in terms of funds needed?

Well, if a person needs at least 70% of his or her income to support themselves comfortably after retiring, Samantha would need at least $280k more in her account to support her retirement.

Women May Spend Fewer Years in the Workforce

While times have changed, it's important to remember that the women of the Boomer generation face a different future.

When women of this generation became mothers, it was very common for them to stop working. Yes, there might have been the off chance that a mother would have taken on a part-time job to help out with finances, but for the most part, they never returned to the workforce full-time.

With that in mind, women in general, are known to take a permanent reduction when it comes to their Social Security benefits by claiming Social Security at age 62 instead of waiting to their full retirement age, or age 70.  

In addition to that, women typically receive Social Security through spousal benefits or widow benefits since women typically live longer than men. But with an increasing divorce rate and a decrease in people getting married or remarried; few women are eligible for spousal or widow benefits.  

Women Still Earn Less than Men

Studies have consistently shown that women still earn less than men doing the same work and many factors contribute to this such as:

  • Jobs with flexible hours usually don't pay as much
  • Some women fail to work long enough to make investing in a retirement plan worth it
  • Most part-time jobs do not offer a 401K or other retirement plans

Women Are Typically More Conservative with Their Money

When it comes to investing, statistics show that women favor lower risk and greater conservatism such as:

  • CDs
  • Money Markets
  • Fixed Growth Investments

If a woman has a reasonably substantial retirement nest egg built up, this can all work pretty well. But if the nest egg doesn’t exist, this won't be as beneficial, especially if they're going through an accumulation phase.

Women Often End Up Being Caregivers

We already know that women often quit their jobs once becoming a mother but what happens when the child turns eighteen? Does childcare stop?

Oftentimes, it doesn’t.

Typically, a parent will put funds towards their children's school tuition, healthcare, car insurance, and even their phone bill even after their child has turned the legal age of eighteen.

In addition to that, if a parent or spouse were to become ill, a woman is more likely to stop working to take care of them.

When it comes to retirement, the approach for women should be different, especially in regards to retirement income planning.

It's helpful to keep the conversation with your partner open, active, constructive and vibrant. Be sure to use this dialogue to create the opportunity to address concerns while also helping you better prepare for a fruitful and pleasurable retirement.