Closing the Gap in Women’s Retirement Savings
Planning ahead may help you achieve the retirement of your dreams.
Retirement should be a time of relaxation and enjoyment, but when it comes to retirement savings, 50% of women say they feel behind.1
There are several potential causes for these feelings, from the gender wage gap to reduced time in the workforce.
If you’re feeling behind in the retirement savings game, there are strategies you could employ may help to set yourself up for the secure and comfortable retirement you’ve earned.
Below we’ll dig into some of the challenges facing women when it comes to retirement savings and share actionable tips to help you bridge the gap between where you are and where you want to be.
Women lag behind men in retirement savings for multiple reasons, including a pay gap, retiring earlier than planned, and less time in the workforce.
Women’s retirement needs are different than men’s, due in part to their longer life expectancy and higher likelihood of health problems requiring medical care.
The earlier you begin planning for retirement, the more likely you are to have enough savings on hand.
Every Woman Needs a Retirement Plan
Retirement planning is an important aspect of financial wellness and involves looking ahead to the life you want to live after you finish working.
This often requires you to think about the expenses you’re likely to have and if your future income sources are able to cover your needs throughout your retirement years.
Saving for retirement is important for everyone, but according to the Transamerica Center for Retirement Studies, only 1 in 5 women feels “very confident” about being able to retire comfortably.2 Another report from Goldman Sachs found 50% of women believe they’re behind on saving for retirement, compared to 35% of men.3
Let’s take a look at some of the common reasons behind these feelings.
Minding the Gaps: Women Face an Uphill Battle
It's easier to understand why some women feel behind when you look at the numbers.
“Throughout history, women have been discriminated against — from credit discrimination to wage and profession gaps,” says Tracey Dunlap, Executive Vice President and Head of Customer Experience at Jenius Bank.
“Fast forward to today, and 2023 shows two-thirds of women act as either the sole household wage earner or co-wage earner. Yet women still, on average, make only 82 cents for every dollar men make.”
Moreover, research has shown that women still bear a majority of caregiving responsibilities for children or aging family members. These responsibilities often affect their ability to save for retirement as they may spend less time in the workforce, resulting in lower lifetime earnings and lower Social Security benefits.4,5
The gap in savings is even larger for same-sex couples, with married female couples earning about 23% less than married male couples.6
With these numbers in mind, it’s important for women to spend more time planning for their retirement years to make sure they’re set up for success.
Retirement Planning for Women Looks Different
Just as women’s working lives are different from men’s, their retirement looks different too.
While the needs of each woman are unique, here are some common factors that you may want to consider as you create your retirement plan.
Live Long, Live Well
On average, women live longer than men, so it’s important to plan for more retirement years.7
As part of this increased lifespan, studies show that women are more likely to have health problems and spend more time in a disabled state in their later years that could require long-term care.8 Depending on where you live, long-term care may cost anywhere from $5,000 to $10,000 per month or more.9
While there are some government programs to help older folks afford their healthcare costs, they have several limitations that may be tricky to understand. If you don’t think these programs could work for you, setting aside additional funds for these costs may be a good idea.
For healthcare specific costs, there are a few options for saving, including setting up a separate savings account or purchasing a long-term care insurance policy.
It’s important to take your marital status into consideration as you plan for retirement. A woman who’s married today might be single when she retires, or vice versa. So, retirement planning isn’t a one-time event. As life changes, you’ll need to revisit and potentially reevaluate your plan.
Marital status is important because it directly influences amount of money you’ll need when you retire. For instance, people who plan for retirement as a couple generally need a larger financial cushion, for a larger living space and double the healthcare, etc., than someone who is planning for retirement alone. But married couples may have two incomes (and retirement plans such as a 401k or IRA) to contribute to the bigger funding needs. Still, a single woman may need to save a larger percentage of her income in order to live a comparable retirement lifestyle to a married couple.
Marital status also plays a significant role in your eligibility for certain benefits, such as Social Security.
Social Security Benefits
As you know, Social Security is a government program that provides income to Americans who are retired or unable to work due to a disability.
When it comes to accessing Social Security benefits for retirement, women may choose to delay receiving them until they are 70 or older. Delaying these benefits typically results in a higher benefit later on.
Social Security benefits may be affected by current marital status, being widowed, or being divorced. In addition to your own Social Security benefits, being married, widowed, or even divorced could entitle you to part of your current or former spouse’s benefits as well.
For example, if you’re 60 or older, and your spouse has passed away, you may be eligible for widow’s benefits. The benefit amount will depend on your age and the benefit amount your spouse was entitled to at the time of their passing.
The Social Security Administration has additional benefit information for spouses on various scenarios that could impact the benefit amount you’re entitled to.
How to Close the Retirement Savings Gap
Now that you have an understanding of some of the special factors affecting women as they plan for retirement, lets review a few strategies to help close the savings gap and help set you up for a comfortable retirement.
1. Save More of Your Earned Income
As we mentioned, women still make less money, on average, than men. That leaves women with less income left over each month to allocate to longer-term savings. If they want to keep up with their male counterparts, women will have to save a higher percentage of their income each month.
As a woman, what’s your best retirement savings option? One of the most effective is maximizing contributions to retirement accounts. By doing so, you may be able to take advantage of tax benefits in the near term and potentially higher growth in the long run.
If you’re in a corporate job, it’s likely your employer will also match your 401k contribution, up to a limit. Don’t miss that matching if they offer it… it’s part of your total compensation, and you deserve it.
Additionally, if you’re over 50, you may be able to take advantage of catch-up contributions for certain retirement accounts.
If maxing out your retirement contributions isn’t an option right now, consider placing your savings in a high-yield savings account. Doing so may keep your funds accessible, while potentially giving you a better rate of return than most savings accounts at traditional banks.
2. Diversify Your Investments
In addition to investing in the typical retirement accounts, diversifying your holdings may also increase your total net worth and help you have more money on hand for your retirement.
One way to diversify your investments and help you close some savings gaps is self-directed investment accounts. Research from Fidelity shows that more 67% of women were investing outside of their retirement savings accounts in 2021 compared to just 44% in 2018.10
When diversifying your holdings, it’s important to create a balanced portfolio that allows for long-term growth while minimizing risk. Many experts advise investing in different industries and using different vehicles to make these investments.
For example, a balanced portfolio may include investments in real estate, money market instruments, like certificates of deposit, government bonds, and stock portfolios.
By spreading your money across different investment types, you may be better able to safeguard your long-term returns. Investing in different areas gives your portfolio flexibility to handle changes in the market without sacrificing future stability.
3. Talk to a Pro
When it comes to retirement savings, you don’t have to know everything!
If you find yourself feeling unsure about the right move for you, consider talking to a retirement savings professional. They help analyze your personal financial situation and goals to create a plan based on how much money you may need in retirement.
They could also advise you on the best account types and savings strategies to help you achieve these goals. They may also help you determine the right times to adjust your strategies as you get closer to retirement.
Review Your Retirement Plans Regularly
Whether you’re a single head of household, primary wage earner, or partner in earnings, it’s important to remain an active participant in the retirement planning process throughout your working life.
Revisit your goals and progress on a regular basis and consider consulting a financial advisor on any adjustments you may need to make.
In a relatively short time, women have made tremendous strides in the workforce, gaining the kind of financial independence and earning power their grandmothers dreamed of.
As women work to close the gap on earnings in their working lives, we can’t neglect the need to also close the gap in saving for the years that come after. By taking the time to review your retirement plans and actively manage these savings, you could be on the road to a comfortable retirement.