Whether it’s traveling the world, spending time with grandchildren, or simply enjoying some rest and relaxation, most people have hopes and dreams for their retirement years—but reaching those goals can be especially hard for women.
That’s because a gender gap exists when it comes to women’s retirement savings versus men’s.
USA Today reports that 40% of retired women have $100,000 or less in savings, compared with 33% of retired men, and that women have less than half the retirement savings of men ($44,000 versus $91,000). In addition, the average Social Security monthly benefit check in December 2022 was $1,638 for a retired woman and $2,020 for a retired man.
And for single women, the disparity is even more pronounced. Single women ages 55 to 64 had $88,600 in retirement savings in 2022, on average, while single men had $136,685; married couples had $423,802.
Meanwhile, a woman who divorces at age 50 or older can expect to see her standard of living decline by 45%, while a man’s standard of living slips by just 21% after a gray divorce.
Why Do Women Face a Retirement Savings Gap?
There are several reasons why women face an uphill battle when it comes to saving for retirement:
- PAY GAP: According to the Federal Register, “Women working full-time and year-round are paid an average of 84 cents for every dollar paid to men. In more than 90 percent of occupations, women earn less than men—and these disparities are even greater for women of color and women with disabilities.”
- CAREGIVING: Women are more likely to sacrifice their careers to care for their children and aging relatives. The U.S. Department of Labor projects that mothers lose $295,000 in employment-related costs due to providing care to minor children and parents, parents-in-law, and spouses. This includes $237,000 in lifetime earnings lost and $58,000 in lost retirement income from Social Security and employment-based retirement plans.
- LIFE EXPECTANCY: U.S. men die nearly six years before women, according to Harvard School of Public Health. This leaves women stretching their retirement savings over longer periods of time.
- DISABILITY AND CHRONIC ILLNESS: With older age comes higher risk of disability and chronic health problems for women. The average womanwho lives past age 65 will spend 2.8 years in a disabled state, or 3.0 years if they live past 80. This results in more women needing costly long-term care assistance than men, with around two-thirds of assisted living residents in the U.S. being women.
What Can Women Do to Bridge the Retirement Savings Gap?
- SAVE EARLY AND AGGRESSIVELY: Women should save as much as they can for retirement during their early working years. Money saved during this time—before taking time off to raise kids or care for family members—will continue to amass compound interest during employment gaps.
- DELAY RETIREMENT: People think of 65 as the ideal retirement age. But with many women living well into their 80s or 90s, retiring at 65 could mean a 20- to 30-year retirement. Continuing to work past age 65 can help women make up for earnings missed while raising children or caring for family, plus provide additional social and mental advantages.
- CONSIDER ANNUITIES: An annuity is an insurance product that’s designed to turn money into an income stream for retirement, and it can help women hedge against outliving their savings. A woman can fund an annuity through a lump sum of money or regular payments (known as principal). The principal contributions earn a tax-deferred rate of return through a fixed interest rate or interest linked to a market index. Then, immediately or after a period of time, the annuity enters its payout phase and begins paying income.
- DELAY SOCIAL SECURITY BENEFITS: Seniors can receive 100% of their Social Security benefits once they reach their full retirement age (FRA) of 67. However, if they delay their benefits, they’ll receive up to an 8% benefit increase for each year they delay until age 70. This could result in up to a 24% higher monthly benefit. Delaying Social Security benefits is a wise strategy for many women who can wait to begin withdrawing and who believe they have a long life expectancy.
- ENTER RETIREMENT DEBT FREE: Debt can quickly eat into a nest egg, so women should strive to pay off as much debt as possible prior to retiring, including any mortgage. When debts are paid off, more retirement income is available for other uses.
- CONSIDER LONG-TERM CARE INSURANCE: Long-term care is one of the most expensive costs many women will face in retirement, with a private room in a nursing home costing around $330 per day. Medicare often won’t cover long-term care, and Medicaid can be difficult to qualify for, so many women turn to long-term care insurance. This coverage is a form of health insurance specifically designed to pay some of the costs of long-term care services. It can cover expenses in a variety of settings—from at-home care to a nursing facility.
Want more? Check out our blogs, 5 Strategies That can Help Women Improve Their Financial Health and Financial Wellness & Self-Care: For Women, It Isn’t Just About Money
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