Discover the reasons most women earn and save less than men and the steps women can take to ensure financial independence in retirement.
There is a gender gap in retirement savings. Over their lifetime, on average, women earn less money than men and live longer. As a result, they have an increased risk of outliving their retirement savings.
Women Earn and Save Less Than Men
On average, women earn $0.82 for every dollar (PDF) a man earns.
During their career-building years, women cite family and home responsibilities (PDF) such as caregiving as the most common reason for not working. As a result, they work fewer hours or accept a job that offers more flexibility but lower pay, reducing their yearly earnings.
“The lifetime earnings of mothers with one child are 28% less than the earnings of childless women, all else equal, and each additional child lowers lifetime earnings by another 3%,” according to The Center for Retirement Research at Boston College.
Time away from the workforce can also lessen women’s opportunities for building new skills and networking, further impacting their career advancement and widening the gender pay gap.
Additionally, members of the “Sandwich Generation,” adults in their 40s and 50s who have children and aging parents, often provide financial and emotional support to their loved ones. According to a study by AARP, 58% of women serve as a caregiver for elderly parents or a spouse, taking time away from paid work to carry out unpaid caregiving duties. These duties further impact their Social Security and retirement savings.
Women Depend More on Social Security
Social Security Benefits (PDF), which women strongly rely on in retirement, are calculated based on average indexed monthly earnings during the 35 years in which a person earned the most. Therefore, time spent out of the workforce reduces the benefits a woman can expect later in life. Being married or widowed can increase a woman’s benefit depending on how much her partner earned compared to her.
If a woman is divorced, the situation is a bit more complicated (PDF) based on how long she and her partner were married, how long they have been divorced, and if she remarried.
Women who never married or were married fewer than 10 years will not be able to rely on collecting spousal benefits and are more likely to live in poverty (PDF), even with Social Security benefits, when they are 65 or older.
Women Report Lower Financial Literacy
Regardless of age, relationship status, or education level, women report (PDF) lower levels of financial literacy than men. They feel confident they can make daily money decisions, but that confidence decreases when it comes to long-term investing, including funding retirement. Women typically live longer than men, giving even greater urgency to the total investments and savings they accrue over a lifetime.
How We Can Improve
Issues like the gender-based wage gap, family leave and childcare, caregiving and domestic labor, and basic financial literacy education require collective effort to effect change. However, for changes women can make today, try the following:
- Take a course in money management or investing. Community colleges, universities, adult education centers, libraries, credit unions, financial service companies, and government websites offer financial education classes for adults.
- Speak with a financial advisor. Ask your friends or colleagues for recommendations. Make sure the advisor is a fiduciary, meaning they are legally bound to act in your best interest. Talk with them about your financial goals and set up steps to achieve them.
- Create a financial plan. Figure out a plan that works for you, that is achievable, and gives you the freedom to enjoy life today as well as prepare for the future. Check out our Planning Your Financial Future Checklist to help you get started.
- Supplement your retirement. Look into saving money through deferred compensation and other savings vehicles.
- Seek support. Find out if you have family or friends who are willing to share childcare duties. Seek programs in your area that assist with elder care.
- Find a mentor or sponsor. A mentor provides you with the knowledge of their experience to guide you in your career. A sponsor actively promotes your skills and advocates for you, even when you are not in the room. Both can help advance your career.
- Ask for a raise, if possible. Gather the information you need for the negotiation process through online job sites. Transparency is gaining traction as more people share their salaries online.
- Pay it forward. If you have children, ensure they are financially literate and know how to balance a budget and establish a savings plan.
The gap in women’s retirement savings will not close overnight. Considerable systemic barriers still exist, despite efforts to correct the issues. In the meantime, women can help ensure their own financial success so they can achieve the retirement peace of mind they deserve.
Related Posts
FAQs
The median retirement savings for women is $84,000 lower than that of men, according to a new report. Even a bull market can't help women catch up to men when it comes to retirement savings.
Why is it more difficult for women to plan for their retirement than it is for men? ›
Women experience more career interruptions
And lower lifetime earnings may mean fewer opportunities to save for retirement as a whole.
Why do women earn less on average in social security earnings? ›
Employment history and earnings.
When they are working, women on average earn less than their male counterparts. Thus, women generally receive smaller monthly Social Security benefits based on their own earnings histories, as compared to men.
Is CalPERS enough for retirement? ›
Your CalPERS pension may not provide all the income you need when you retire so you must factor in how much you'll need from other sources. Another important element of preparing for the future is estate planning.
Who is least likely to have retirement savings? ›
Not only are racial minorities less likely to have retirement accounts, but those who have accounts tend to have much lower balances than their White counterparts.
Are women 80% more likely to be poor in retirement? ›
Women are 80 percent more likely than men to be impoverished at age 65 and older, while women between the ages of 75 to 79 are three times more likely than men to be living in poverty. Widowed women are twice as likely to be living in poverty than their male counterparts.
Why is it harder for women to retire? ›
Women face a series of challenges that add up to make retirement prospects “pretty bleak,” including issues such as gender pay inequality, longer life spans and a lack of savings based on U.S. Census Bureau data.
Why do women need to save more than men? ›
Because they earn less, women often are unable to invest as much as men. However, in order to make up for other discrepancies in retirement benefits, women may actually need to invest more. And because women often leave work to bring up children or care for elderly relatives, they clock fewer total work hours.
Why do men save more money than women? ›
The discrepancy between the dollar amounts saved and the percentages of incomes earmarked for savings can be attributed to the reality that the average woman is still earning less than the average man.
How does Social Security affect women? ›
Social Security offers a basic level of protection to all women covered by this program. When women work, they pay taxes into the Social Security system, providing for their own benefits. In addition, their spouses' earnings can give them Social Security coverage as well.
If every female, from all economic backgrounds, is paid fairly, the poverty rate will decrease in families and children will have a better education and home life, and much more. Another report found that, if women were paid fairly, single women's income would rise by 17% (Institute for Women's Policy Research Center).
What is the difference between men and women retirement age? ›
According to U.S. Census Bureau Data, the average retirement age for women in 2016 was 63, compared to 65 for men. Other sources, like Forbes, quote the average retirement age at 65 for men and 62 for women as of 2021, which means women are retiring even earlier than men as time goes on.
Is CalPERS pension better than Social Security? ›
In contrast, CalPERS retirees receive a pension up to five times greater than Social Security payouts for individuals with an equivalent working history and age. To estimate how your pension may compare to a Social Security retirement benefit, use this Calculator.
Will CalPERS reduce my Social Security? ›
Your CalPERS retirement benefit can affect your Social Security benefit. And your Social Security potentially can affect both the amount of your monthly pension contributions before retirement and the amount of benefits you receive after retirement. Did you know that 33% of our retirees do not receive Social Security?
What is the 5 year rule for CalPERS? ›
To be eligible for service retirement, you must have at least five years of CalPERS-credited service and be at least age 50, 52, or 55 depending on your retirement formula . If you have a combination of classic and PEPRA service, you may be eligible to retire at age 50 .
What is the average retirement savings for women? ›
An even larger difference appeared when examining 401(k) plan account balances by gender. Men owned accounts with a median balance of $62,040, while women's accounts had a median balance of $21,638, a difference of 65%.
Do men save more money than women? ›
By the time women retire, we have 44% less saved than men, according to a Vanguard study. Men's larger account balances are primarily based on higher wages, not due to greater participation levels in their retirement plans. One of the biggest reasons women save less is the gender pay gap, but it's not the only reason.
What is the average 401k balance by gender? ›
According to Bank of America 401k research, the average male-owned 401(k) balance was $89,000, compared to just $59,000 ($30K less) for those owned by females in 2023. Additionally, Statista revealed that 50.56% of women, compared to just 38.29% of men, had no money in their savings at that time.
Do women have less wealth than men? ›
According to an analysis of the Survey of Consumer Finances (SCF), households with women respondents had 55 cents in median wealth for every dollar of wealth owned by households with respondents who were men. SCF respondents can be single or coupled.
