Gender Disparities in Retirement
Everywhere we turn, it seems, there’s an article or newscast about how women are at an economic disadvantage, especially regarding lower wages. Just imagine how much more women could contribute to economic growth if such disadvantages were eliminated.
But we want to work toward counteracting some of those challenges, particularly where retirement income planning is concerned. Even married couples with their retirement savings on track may not be aware of different scenarios that could potentially leave a widow with an income shortfall during her retirement years. We’re happy to review retirement income strategies for your household and make recommendations tailored for your financial situation; just give us a call.
In the meantime, let’s take a look at some of these gender disparities and how they can impact a woman’s personal financial future. For example, women tend to borrow more for college undergraduate student loans than men and take longer to pay them back.1
Presumably, one of the reasons it takes them longer to pay back student loans is that women, on average, tend to earn lower salaries than men. For example, in the United States, white women are paid about 76 cents on the dollar relative to white men.2 Black women receive only 67 cents per dollar.3 This may seem like a woman’s issue, but it’s not. In theory, the longer it takes to pay off student loan debt, the less women can save for retirement, and the less women save, the more reliant they might be on Social Security for retirement income. A demographic that relies heavily on Social Security for retirement income could potentially cause an increase in FICA taxes, which can affect everyone.
One of the ways working women can improve their retirement income situation is by working longer. There are several advantages to this. First, for women who take time out of the workforce for raising children and general caregiving, working longer provides more tax years from which the 35-year calculation for Social Security benefits is drawn.4 Second, women tend to live longer, so they could feasibly work until an older age.5 And finally, researchers have determined that the average woman who works to age 70, rather than retiring at 62, can increase her monthly Social Security check by 12 percent.6
Another area in which women can improve is financial literacy. In a recent study, 18 percent of women ages 60 to 74 passed a 38-question quiz on retirement income topics, compared with 35 percent of men the same age.7 Fortunately, this is an area in which any woman can take the initiative to pursue on her own. It doesn’t require wage legislation passed by Congress; salary negotiation skills with employers; or shortening the time spent out of the workforce for caregiving.
The more women can learn about retirement income planning, the better prepared they can be for their long-term financial future. Planning for retirement is a skill that we believe should not be delegated to fathers, husbands, boyfriends and male children. At the very least, it’s a shared responsibility — but be aware that chances are good a woman will be managing money on her own at some point during adulthood due to divorce or widowhood.8
Content prepared by Kara Stefan Communications.
1 Kim Blanton. Center for Retirement Research at Boston College. June 8, 2017. “Is There a Student Loan Gender Gap?” http://squaredawayblog.bc.edu/squared-away/is-there-a-student-loan-gender-gap/. Accessed July 31, 2017.
2 AAUW. Spring 2017. “The Simple Truth about the Gender Pay Gap.” http://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/. Accessed July 31, 2017.
3 Casey Quinlan. ThinkProgress. July 31, 2017. “Black women’s ‘equal pay day’ reminds us how persistent the wage gap is.” https://thinkprogress.org/black-women-wage-gap-ca285791a371. Accessed July 31, 2017.
4 My Retirement Paycheck. National Endowment for Financial Education. 2017. “How are Social Security benefits calculated?” http://www.myretirementpaycheck.org/Social-Security/How-are-benefits-calculated. Accessed Aug. 7, 2017.
5 Social Security. “Calculators: Life Expectancy.” https://www.ssa.gov/planners/lifeexpectancy.html. Accessed Aug. 7, 2017.
6 Kim Blanton. Center for Retirement Research at Boston College. May 18, 2017. “Women Get a Bigger Social Security Bump.” http://squaredawayblog.bc.edu/squared-away/women-get-a-bigger-social-security-bump/. Accessed July 31, 2017.
7 Christopher Robbins. Financial Advisor. July 27, 2017. “4 Out Of 5 Older Women Flunk This Retirement Literacy Quiz.” http://www.fa-mag.com/news/4-out-of-5-older-women-flunk-this-retirement-literacy-quiz-33885.html?section=. Accessed July 31, 2017.
8 Susan L. Hickey. Newsmax. June 23, 2017. “Many Women Will Spend Their Later Years Alone; Are They Ready for That?” http://www.newsmax.com/Finance/Personal-Finance/older-women-alone-financially/2017/06/22/id/797691/. Accessed July 31, 2017.
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We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
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