How many of us have seen Grandma outlive Grandpa? Or Mom outlive Dad? Families try to help and plan for these major events, but it goes well beyond taking on supportive tasks such as yard work, driving to doctor’s appointments, and helping with shopping and cleaning.
The issues women face leading up to and during retirement are unique, go beyond addressing daily tasks and require additional planning compared with previous generations due to changing economic and demographic factors.
Although a significant number of American workers are already failing to adequately prepare for retirement, women, in particular, have some additional challenges to consider as they plan for their future in retirement. Policy makers and the private sector must take these factors into consideration in developing new approaches to strengthen retirement security.
Most women will outlive their spouses and face higher costs in retirement
It is no secret that women have a longer life expectancy than men. This difference is particularly significant among couples who reach the age of 65, with the woman likely to outlive her husband by 11.5 years on average. This means that many of the household expenses once shared between the two must now be borne by the woman alone.
At the same time, women face higher health care costs in retirement. A 63-year old woman is likely to spend roughly 30% more in retirement health care expenses than her husband, not just because she lives longer, but because she is more likely to suffer a chronic illness and less likely to benefit from the unpaid services of a spouse as a caretaker. With the cost of health care expected to continue to rapidly increase, this problem will only become worse.
Women face an earnings gap and challenges to building wealth
The well-known earnings gap between men and women makes it much more difficult for a woman to save and build wealth over a lifetime. Although the gap in median weekly earnings between full-time men and women closed from 59% in 1981 to 80.5% in 2017, progress has slowed in recent years.
The earnings gap is especially significant for households where mothers are the sole breadwinners. In 2014, 40% of families with children under 18 relied primarily or only on the mother’s income. Single-mother families are the most likely to be in poverty (28.4%), more than five times higher than for married-couple families (5.2%).
Women are more likely to face additional career disruptions
Life events, such as marriage and children, can have different financial consequences for women and men. Married women are less likely to be in the workforce than married men or women who have never married, are divorced, or are separated. Women with children are much less likely to be in the workforce than men with children.
Elderly caregiving also falls disproportionately on women, and many disruptions from caregiving responsibilities negatively affect female labor participation and wages. According to a 2013 Pew Research Center survey, many more women than men reduced work hours to care for a child or family member, took time off, quit their jobs, or turned down a promotion. As a result, women were twice as likely as men to say that taking time off hurt their overall careers.
Career disruptions in midlife have substantial consequences in retirement because people not only forego income, but also lose out on work-provided benefits such as health insurance and employer-sponsored retirement plans. Women who leave the workforce at age 50 or older to care for a parent are estimated to lose an average of $300,000 in wages and benefits over their lifetime.
Other factors reduce saving and earning opportunities for women
Women save lower amounts not only because they often earn less and have to deal with additional career disruptions, but also because they face other factors that reduce their ability to save. They are more likely to work part-time, carry greater debt burdens, and are more vulnerable to other financially disruptive life events compared with their male counterparts.
•More part-time work. While women account for 47% of the workforce, they make up nearly two-thirds of part-time workers. Part-time workers are less likely to have access to benefits, such as paid time off, health insurance, and employer-sponsored retirement savings plans. An analysis of U.S. Census Bureau data by the National Institute on Retirement Security shows that even though working women are more likely than men to be working for an employer that offers retirement plans, this is overshadowed by the fact that women are less likely to be eligible for those plans than men.
•Higher levels of student debt. Today, two-thirds of the more than $1.3 trillion in total U.S. student loan debt is owed by women. With lower earnings, it takes women longer to pay back such debt and reduces their ability to save for retirement.
•Greater financial shock with divorce or death of a spouse. Life events, such as divorce, also disproportionately affect women’s retirement security. After a divorce or separation, household income decreased by an average of 41% for women in or near retirement, compared with a 23% drop for men. Becoming a widow had a similarly negative impact on women’s household income.
Overall, women 65 and over are more likely to live in poverty than their male counterparts. Almost one-half of elderly unmarried women receiving Social Security relied on their benefits for 90% or more of their income, compared with 22% of all seniors, in 2014. In addition, women generally receive lower Social Security benefits than men because they work for fewer years and receive lower pay. In 2015, the average yearly Social Security benefit was $14,184 for women, compared with $18,000 for men.
Women’s challenges must be addressed in retirement policy planning
When it comes to improving retirement security, one size does not fit all. As policy makers and employers come to understand how women’s experiences differ from those of men, there are steps they can take to begin to help women prepare better for retirement.
Improved financial education to promote better planning and understanding of the impact of important life decisions on retirement savings should be paired with other concrete steps to increase options. State-sponsored retirement savings programs are one way policy makers are helping to expand access for those without an employer-sponsored plan. The impact of career disruptions could be minimized by providing ongoing access to retirement savings programs for nonworking individuals. Better use of existing options, such as spousal IRAs, and other savings programs would further expand the opportunities to save.
To help all workers attain financial security in retirement, policy makers, plan sponsors and providers must do a better job of offering more flexible options that allow workers to consistently maintain access to a way to save for retirement, even as they move in and out of the workforce to address other needs.