The gender income gap and its impact on Women’s Retirement.


Today everyone is worried if they are saving enough for when they retire. Women, it seems are still in a weaker position in terms of their retirement savings and this is according to recent study by the National Institute for Retirement Security (NIRS).

From the study we learn that women over the age of 65 have an average of $47,244 representing their household retirement income. Men on the other hand have an average of $57,144 which includes pensions, investment income, earnings and social security.  Therefore, women are getting only 83% of what men get, putting them at a disadvantage.

Women have benefitted over the years from the changes that have taken place in the workforce. It is not unusual to see women heading large corporations and banks and even winning an Intertops poker bonus. However, this study raised several issues that point to there being a gender income disparity in retirement. These include child care responsibilities, divorce and wage disparities during a woman’s working life.

Critical points of the NIRS study include the following: 

  • Compared to men, women earn approximately $0.80 on the dollar during their working lives. This means they are able to save less for retirement.
  • The lifespan of women is longer and therefore they need to make their savings last longer. Women are also more like to be widowed.
  • It is likely that women will have gaps in their working careers or need to take part time work in order to take on the responsibility of childcare and other caretaking responsibilities.   This will mean reduced Social Security contributions and therefore less income on retirement.
  • Caregiving responsibilities which force the woman out of the workforce, sometimes for years, detrimentally affects their income and the total amount of retirement savings.
  • Those women caregivers under 50 years have 30% less wealth at the time of retirement, than those women who are not caregivers. Men in the same situation the figure is 14%.   Women caregivers over the age of 50 will have 58% less wealth at the time of retirement than those who are not caregivers.   The figure for men is 48%.
  • Those women living well into their 80’s and beyond will likely struggle with their retirement income. Added to this they may well have higher healthcare expenses and also be widowed.
  • The impact of divorce, and when it occurs, is likely to have a significant impact on a woman’s overall retirement package.

It is important that women look for ways during their lifetime to limit the disparity in gender pay and find ways to increase their savings for retirement.   Becoming more financially educated and being more conscious about saving money for the future can go a long way to make a woman more financially secure at the time of retirement.

Improving Financial Literacy can improve the situation 

It is important to be aware of the fact that the gender pay disparity actually grows and will multiply over a woman’s lifetime. According to Catherine Azeles, CFP and investment consultant “People can think that it’s just a little bit of money now, but that thinking fails to take into account the impact that the pay gap will have over a lifetime”.

Azeles suggests that men are more confident when discussing issues concerning money and, therefore, women are likely to miss opportunities that come up related to savings and retirement plans.   It is crucial that women educate themselves financially, create long term saving plans early on in their careers and always set a budget.

Azeles goes on to suggest that “women can find ways to reduce their debt and establish a positive credit history”.   With little or no debt, the more women will have to invest in their retirement plans.  With better credit scores, they will have more choices if they need to borrow money and the borrowing costs will be lower.

Those women interested in starting the process of becoming more financially literate can join some of the education sessions often offered by employer retirement plans and schemes. These can prove very useful.   Taking it a step further, they can find a mentor, someone they can trust to teach and direct them on their financial path.

With the help of a mentor, a woman may have more confidence and this will enable her to go for a higher salary and to push for better employment benefits. Better renumeration at an early stage of a woman’s career will help to reduce the gender pay gap and allow for more savings to be made over her lifetime.

Self- Employment – one way to overcome the gender pay gap in retirement 

Self-employment can be a very good option for some womenBut It can be a riskier option and of course depends on the resources available.  However, it does make her more independent in terms of earnings and she is in charge of her own retirement plans.  Self-employment can offer flexibility in earning and work scheduling which can work well with caregiving responsibilities.

A financial advisor for Aurora Financial Planners, Kathleen Owens suggests that there are many options for a woman to find mentors and other professionals who can help them on the path to self-employment.   If a woman feels self-employment is the path for her then she can seek out those mentor groups working in the industry that she is focused on. “Hopefully, you will have good help from someone who took the plunge before you and is willing to share their secret sauce for success” says Owens.

Divorce and its impact on the gender income gap 

Today it is estimated that around 50% of all marriages in the United States will end in divorce.  Notwithstanding the progress and changes made to women’s lives, they are often not in charge of the finances of the home.  They may not even have any real idea of the family assets and probably have no idea concerning their partner’s retirement savings.

When a woman becomes more financially educated, she will have the necessary tools to explore and understand the workings of the household finances.   She will also be better equipped, if she should divorce, to go about getting her share of her partner’s retirement savings during the negotiations.   According to Azeles “Sometimes women are so eager to get out of a marriage they suffer financially by not taking the time to understand what their rights are to the assets in their marriage”.

The fact is that a pension accumulated during a marriage is considered a shared asset. However, this is not routinely divided.   It is up to her to pursue this.  If she does get her fair share of this shared asset, this will close the gender pay gap and will reimburse her for the years she spent out of the workforce while taking on caregiving responsibilities.  These assets will also go some way to reducing the gap in savings that occurred while she was not working and wasn’t paying into an employer’s retirement plan.

Long term care – its impact on the gender income gap 

It is usually women who become the caregivers, and especially for an aging parent and even a partner. However, it is really important for women to raise the topic about their own care long before the need may arise.   It is always beneficial to know what the various options are.

Women in the United States tend to live longer than men and therefore will require more money to pay for medical care, with income or via insurance.  Raising the topic about insurance for long-term care may be useful in terms of deciding whether it is in fact financially possible, and if and when she should sign up for such a policy. Often these long- term care policies are hugely expensive.

Another option would be to consider a “deferred fixed annuity” which is bought, say, at 65 but does not get released until the age of 85.  This money could, if necessary, pay for long term care or be added to your retirement savings. The terms of these policies offer more flexibility than long-term care insurance.

Having a long- term plan   

The NIRS study does show quite clearly that all women need to take more time to research and work out a plan in terms of caregiving.   This involves talking about it with family members, often a difficult thing to do.   Having a plan and being open with family members about money issues will help in figuring out how to overcome those issues relating to the gender pay gap.

Financial knowledge and the confidence that ensues from it will help women make the necessary decisions and choices to help them find ways to increase their financial assets in the long term.

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