A recent retirement security survey from life insurer Prudential shows that women have less than a third of the median savings of men, putting their retirement security at risk.
According to the survey, women are more likely to delay retirement due to inflation, housing prices, caregiving responsibilities and changes in tax policy. Women are also more concerned than men about unexpected expenses and the well-being of children and family.
Below are other key factors that can leave women less prepared for retirement than men.
Women Earn Less
Lower earnings can inhibit women’s ability to retire comfortably.
According to the data from the Bureau of Labor Statistics in 2023, women who were full-time workers had median weekly earnings of $1,005, which is 83.6% of the $1,202 median for men who worked full time. Women had lower median weekly earnings than men in most occupations for which the BLS has earnings data.
“The dilemma is that while women generally earn less than men, they need those dollars to last longer due to the fact that women, on average, live five years longer than men,” said Eleanor Johnson, founding principal and managing director at Signature Private at Highland Capital Brokerage in Scottsdale, Arizona, in an email.
[Read: How to Take Advantage of 401(k) Catch-Up Contributions.]
Time Away From Traditional Workforce
Time away from the workforce to raise children or care for elderly parents can significantly impact women’s savings rates.
“Career interruptions, often for caregiving responsibilities, lead to reduced earnings and consequently lower retirement contributions,” said Einat Steklov, founder and co-CEO of online lender Kashable in New York, in an email.
“These breaks not only diminish the total amount saved but also affect the compound growth potential of these savings over time,” she added.
Steklov noted that women also face challenges in re-entering the workforce at the same pay level, further exacerbating the gap in retirement savings and opportunities to take advantage of a 401(k) employer match.
Financial Stress
Factors such as income disparity, caregiving responsibilities and time out of the workforce can result in more significant financial stress for women.
In addition, said Steklov, women’s approach to financial decisions and access to credit often differ from men’s.
“Women tend to be more conservative in their investments, which can protect them from significant losses but may also limit their financial growth potential,” she said.
One solution to that problem is financial education, which addresses these unique challenges.
However, “access to affordable credit remains a challenge, particularly for underbanked women or those with lower credit scores.” added Steklov.
[Read: How to Save in a 401(k) and IRA in the Same Year]
The Gender Pay Gap in Retirement
Lower pay affects not only lifestyle during earning years but also in retirement.
Data from the Institute for Women’s Policy Research in May 2024 identified a 32.6% gender gap in retirement income.
The research indicates that women’s retirement account balances, such as individual retirement accounts and 401(k) account balances, are the main driver of the gap, said Gail Greenfield, executive vice president of pay equity at regulatory compliance software company Trusaic in Los Angeles, in an email.
“For example, the retirement account balance gap for women aged 55 to 64 was 38.7%,” she said. “On the other hand, the Social Security benefits gap and the pension income gap were considerably lower at 24.7% and 18.7%, respectively.”
Greenfield added that the research underscores the need for employers to ensure their pay equity practices encompass all forms of compensation across the employee life cycle.
[READ: How to Maximize Social Security With Spousal Benefits.]
Men and Women Retire Differently
Men and women each have advantages and disadvantages when it comes to retirement readiness.
For example, single women with higher life expectancies than men but lower lifetime earnings due to career interruptions for caregiving are at a higher risk of outliving their retirement resources. “These financial constraints can make retirement planning more complex for single women, requiring careful budgeting and reliance on Social Security benefits or other financial aid programs,” Steklov said.
However, she added, single women may benefit from more robust social networks and community involvement. These can provide essential emotional and practical support, contributing to higher-quality living.
“Despite these challenges, many single women approach retirement with resilience, creativity and resourcefulness, leveraging their social connections and community resources to find ad hoc jobs and successfully navigate this life stage,” Steklov said.
Single men can also face concerns about maintaining financial stability on one income.
“Statistically, men may have higher lifetime earnings and more robust retirement savings due to longer and more consistent participation in the workforce,” Steklov said. “This financial edge allows single men to potentially have more flexibility in their retirement plans, such as engaging in hobbies, travel or other leisure activities.”
However, men often have less social support in retirement, which can impact their mental and physical health, Steklov said.
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How the Gender Pay Gap Affects Women’s Retirement originally appeared on usnews.com
Update 07/29/24: This story was published at an earlier date and has been updated with new information.
