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The fact that women make 77 cents for every dollar a man earns is often cited.1 But what isn't discussed as frequently is how this pay disparity — and gender inequality in general — creates significant differences in a man's versus a woman's ability to retire.
Just like the wage gap, the gender retirement gap is real and poses a persistent problem. Several wide-ranging societal and policy changes must take place to close this gap and address the issues that negatively affect retirement for women. In the meantime, women can take steps in their own lives to help ensure they save enough for retirement. Here's what to know.
- The gender retirement gap is the disparity that exists between men and women both in retirement savings and retirement readiness.
- Unless significant action is taken on a national level, the retirement gap between genders will likely present an ongoing problem for women.
- Various factors — such as wage disparity, family commitments, missed career opportunities and longer life expectancies — contribute to the widening gap in retirement security and retirement readiness.
What Is the Gender Retirement Gap?
The gender retirement gap is the disparity that exists between men and women both in retirement savings and retirement readiness.
In many ways, saving for retirement is a broader challenge for many Americans. The average American has $65,000 in retirement savings.2 However, the gulf between women and men is wide. Women age 65 and older, on average, have a median household retirement income of about $47,000; it's around $57,000 for men.3 This means women are living on nearly 20% less in retirement than their male counterparts.
Women Concerned About Financial Security
Factors Driving the Gender Retirement Gap
Unless significant action is taken on a national level, the retirement gap between genders will likely present an ongoing problem for women. This is because various factors contribute to the widening gap in retirement security and retirement readiness.
The gender wage gap is the first and most obvious factor driving the retirement gap. It's an uphill climb for women to save as much as men for retirement when they're making considerably less than a man who does similar work. Though the gender wage gap has closed slightly — as of 2020, women now earn 82 cents on the dollar compared to men — lower pay often means less wiggle room for women to save for retirement once they cover all their living expenses.5
To be clear, the gender wage gap is a complex issue. Discrimination contributes to this disparity, but so do several unique situations women face.
If a woman chooses to have a family, she will likely be out of the workforce for several months (or years if her situation calls for it). When she returns from maternity leave, she may have to work part-time or scale back her hours to focus on childcare. In some cases, she may have to leave the workforce altogether if it becomes too difficult to balance workplace and family demands, especially if an employer doesn't offer enough flexibility for her specific situation.
We've already seen this play out during the pandemic when millions of women left the workforce.6 Many professionals chose to quit their jobs largely because they didn't have the support they needed to balance remote work and distance learning on top of day-to-day family responsibilities.
Missed Career Opportunities
When women leave the workforce entirely or have to on-ramp and off-ramp, they may miss opportunities to acquire new skills that will advance their career and lead to a higher-paying job. They may be passed over for a promotion due to gender bias or because an employer has doubts about their commitment to staying long term. While out of the workforce, they miss out on employer matching contributions that could increase their retirement savings along with their own 401(k) or individual retirement account (IRA) contributions. This also can lessen women's Social Security benefits, which are based on a worker's average monthly earnings during the 35 years they earned the most.7
Longer Life Expectancies
Women also tend to live longer than men. One report found that a woman who reached age 65 in 2019 was likely to live almost three years longer than a man of a similar age.8 Though a longer life expectancy is overall a positive thing, it's a double-edged sword when it comes to retirement. Living longer means retirement savings must last longer. It also can mean more health care expenses as women age and need more resources for medical costs or long-term care.
Another recent study found that a retired couple would need nearly $300,000 to cover health care expenses in retirement.9 Even if a woman needs only half of that to pay for health care costs in retirement, it could consume a significant chunk of her savings.
From less time in the workforce to lower Social Security earnings and longer life expectancy, these factors significantly affect not only women's ability to retire but to do so comfortably. Given the obstacles they face, women must be even more diligent about saving for retirement and following an effective long-term plan.
6 Strategies Women Can Use to Close the Gap
Women can exert some control in narrowing how the gender retirement gap affects them individually. While significant societal and policy changes may be needed to level the playing field, here are six strategies that can help women build their savings and plan to retire comfortably.
1. Contribute to Your Employer-Sponsored Retirement Plan
If you work and don't already contribute to a workplace 401(k), 457(b) or 403(b) plan for which you're eligible, now is a good time to start. You may think you don't have extra money to contribute, but even $25 or $50 a month can go a long way when compounding over a work career. Contributing every month to retirement also will get you into the habit of saving. Plus, if your employer offers a match, you don't want to leave free money on the table and miss a chance to potentially grow your retirement savings.
If you're 50 or older, catch-up contributions allow you to put as much as an additional $7,500 a year into your workplace retirement account, depending on your plan.10 Another benefit of contributing to your employer's plan is that you may be able to get a tax deduction for your contributions, which could lower your current tax bill and potentially provide a larger refund you could reinvest back into your retirement account.
2. Open a Traditional or Roth IRA
If you've maxed out your employer's plan or just want more control over your own retirement savings, consider opening a traditional or Roth IRA.
A traditional IRA allows you to save pre-tax dollars for retirement.11 Like a traditional 401(k), you also get a tax deduction for your contributions, depending on your income. A traditional IRA has lower contribution limits than a 401(k) — $6,500 versus $22,500 for a 401(k) in 2023 — but it can be a great way to learn more about investing and access more stock, bond, mutual fund and index fund options beyond what your employer offers.12
A Roth IRA allows you to invest after-tax dollars for retirement. Because the money you'll contribute has already been taxed, it can grow tax-free and you can withdraw it tax-free in retirement. As long as you meet the requirements and don't make any withdrawals before age 59½, you won't have to pay any penalties. A Roth IRA has the same contribution limits as a traditional IRA, but you can't deduct your contributions. However, for some people, this is worth the trade-off if it means they won't have to pay income taxes on the earnings in their Roth during retirement.
MORE What's the Difference Between a 410(k) & IRA?
3. Talk with a Financial Professional
If you think you could benefit from some guidance, consider talking with a financial professional who can help you craft your unique retirement strategy.
Additionally, many employers now offer financial wellness programs, which allow employees to access financial education for free or discounted rates. If your employer doesn't offer these services, consider talking to a fee-only financial professional who will charge an hourly rate or flat fee based on the services you need.
4. Consider an Annuity
An annuity, which can only be issued by an insurance company, can be used to provide guaranteed income in retirement. With it, you contribute money to a tax-deferred account
. Depending on the type of annuity, you also may receive a minimum guaranteed interest rate, which means the money will grow over time.
One thing to keep in mind with an annuity is that, like a 401(k) and a traditional IRA, you'll have to pay taxes on the gains once you withdraw the money. You'll enjoy tax-deferred growth while the money is in the account, but you'll need to factor in future taxes in retirement.
5. Ask for a Raise or Title Change
The job market is booming, and there are more job openings than there are people to fill them.13
If you're a valued, high-performing employee or have taken on more work in recent years, don't be shy about asking for a raise. It often costs companies more to replace an employee than to retain one, so it's usually in your employer's best interest to ensure you stay with the organization.14 If a raise isn't possible, ask for a title change. A step up in title from senior manager to director or from coordinator to administrator may help position you for a higher-paying role in a future job search, especially if your employer is unwilling to bump up your pay right now.
6. Consider Long-Term Care Insurance
As mentioned, women often live longer than men and may face considerable health care costs in retirement.
To better prepare for this, consider long-term care insurance. Similar to health insurance, you pay a monthly premium for coverage. However, the main difference with long-term care insurance is that you can use this coverage to pay for some or most of your long-term care costs. This can include nursing home residency as well as assisted living and support services such as in-home care.
If traditional long-term care policies seem too expensive for your situation, consider a hybrid policy that combines life insurance with long-term care benefits. With this type of policy, you can use the death benefit — which your beneficiaries would normally receive after your death — to pay for long-term care expenses while you're still alive.
Having a plan to pay for future health care costs is also a critical part of retirement planning, so shop around for quotes to see how much a long-term care policy may cost you. The younger and healthier you are, the more affordable this policy might be, so it's often advantageous to look for a policy as soon as possible.
MORE How Does Long-Term Care Insurance Work? 5 Common Questions Answered
Shaping Your Retirement Strategy
The gender retirement gap will continue to create differences in retirement for women and men for the foreseeable future. However, women can take steps in their own lives to help address this.
If you have a workplace retirement plan, try to contribute to it early and often. Open a traditional or Roth IRA to increase your retirement savings and gain more flexibility in your retirement planning. Plan to talk with a financial advisor to help ensure you're on the right path, and consider an annuity or long-term care insurance to provide guaranteed income in retirement and to better prepare for future health care expenses. The more your prepare today, the more financially prepared you'll be tomorrow.
Live More & Worry Less
- Equal pay for work of equal value. UN Women. https://www.unwomen.org/en/news/in-focus/csw61/equal-pay. Accessed February 28, 2022.
- Caporal J. Average retirement savings in the U.S.: $65,000. The Motley Fool. https://www.fool.com/research/average-retirement-savings/. Last updated July 20, 2021. Accessed February 28, 2022.
- Weller CE, Saad-Lessler J, Bond T. Still shortchanged: An update on women's retirement preparedness. National Institute on Retirement Security. https://www.nirsonline.org/reports/stillshortchanged. Published May 2020. Accessed February 28, 2022.
- Reinicke C. Women are still behind men when it comes to retirement savings. What they can do to build security. CNBC. https://www.cnbc.com/2021/09/15/women-are-still-behind-men-when-it-comes-to-retirement-savings.html. Published September 15, 2021. Accessed February 28, 2022.
- Jones J. 5 facts about the state of the gender pay gap. U.S. Department of Labor Blog. https://blog.dol.gov/2021/03/19/5-facts-about-the-state-of-the-gender-pay-gap. Published March 19, 2021. Accessed February 28, 2022.
- Fry R. Some gender disparities widened in the U.S. workforce during the pandemic. Pew Research Center. https://www.pewresearch.org/fact-tank/2022/01/14/some-gender-disparities-widened-in-the-u-s-workforce-during-the-pandemic/. Published January 14, 2022. Accessed February 28, 2022.
- Your retirement benefit: How it is figured. Social Security Administration. https://www.ssa.gov/oact/progdata/retirebenefit1.html. Published October 2022. Accessed March 26, 2023.
- Women and retirement: The gender gap persists. National Committee to Preserve Social Security and Medicare. https://www.ncpssm.org/documents/issue-briefs/women-and-retirement-the-gender-gap-persists. Last updated October 28, 2021. Accessed February 28, 2022.
- How to plan for rising health care costs. Fidelity. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs. Published August 31, 2021. Accessed February 28, 2022.
- Retirement topics — catch-up contributions. Internal Revenue Service. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions. Last reviewed November 8, 2021. Accessed February 28, 2022.
- Individual retirement arrangements (IRAs). Internal Revenue Service. https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras. Last updated September 19, 2022. Accessed January 3, 2023.
- 401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500. Internal Revenue Service. https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500. Last updated December 8, 2022. Accessed January 3, 2023.
- Brower T. The job market is hot: Now is the time to build your career. Forbes. https://www.forbes.com/sites/tracybrower/2021/09/19/the-job-market-is-hot-now-is-the-time-to-build-your-career/?sh=29ccfb665bd4. Published September 19, 2021. Accessed, Feb 28, 2022.
- McFeely S, Wigert B. This fixable problem costs U.S. businesses $1 trillion. Gallup. https://www.gallup.com/workplace/247391/fixable-problem-costs-businesses-trillion.aspx. Published March 13, 2019. Accessed, Feb 28, 2022.