As more boomers leave the workforce each day the future is uncertain for both genders when it comes to their retirement savings lasting their entire life. Many don’t know what to expect when it comes to rising health care costs, increasing living costs, and longer life expectancies. However, for women the retirement savings gap is even more severe than their male counterparts for many reasons:
- Women still experience inequality in the workforce when it comes to equal pay for the same position according to a study by The National Bureau of Economic Research. The pay gap is 38% between what men and women make each year in the same job position with comparable experience, education, and job performance. Making less money each year equates to women saving less money over time for their retirement compared to men. Women are paid 80 cents to every dollar a man makes; if a man saves 10% for retirement, a woman must save 18% to accumulate the same amount. –National Partnership for Women and Families, 2017 report.
- Women leave the workforce to give birth and raise children, accounting for less working hours over time. Women still traditionally provide care for their children, staying home when needed while men rarely leave the workforce to care for children and maintain steady employment. When women leave the workforce, it is often harder for them to return to the same position and pay rate, often requiring them to choose a lesser pay position to become employed again.
- Women are living longer than men by about three years, on average according to Research from the Social Security Administration. But as each new generation is born, they experience a longer life expectancy of seven years more than their expectancy at birth- thanks to medical advances. Younger generations continue to live longer than the previous, making retirement savings even more critical. What can women do?
Women should work with a financial advisor that factors their longevity, income, and retirement savings gap independently from a partner, regardless of marital status, etc. Their advisor should provide them with an accurate estimate of their gap and a plan to help close it. Additionally, the financial plan should include balancing monthly retirement savings contributions between partners so that there is an equalization of the woman’s retirement savings over time to the other partner’s (the man’s) savings. Too often financial plans don’t address the gap and assume a couple will remain together their entire lives sharing retirement savings assets.
Single women also need to be more aggressive in the amount they save, maximizing their contributions if possible. It’s important they work with an advisor that plans for their unique situation and addresses it, offering solutions outside of traditional retirement savings options other than through employers.
Lastly, women need to address their own retirement savings gap by always participating in their savings plan at work and choosing additional retirement savings options on their own. It is essential that women plan for themselves and don’t assume they will be taken care of or leave all the planning to the other partner.