you have enough income during retirement is hard enough, but it can be even harder
if you’re a woman. Some causes are obvious; others less so. But no matter the underlying
reasons, there are things women can do to help close the gender retirement gap.
underlying causes of the retirement gap for women are complex. First, women continue
to earn roughly $.80 for every $1 that men earn in a comparable job.1
That not only reduces the amount of income they can save, but it can also lower
Social Security contributions and their employers’ matching contributions to a 401(k)
or other retirement plan, further shrinking funds available to them during retirement.
have shown that women generally take more time away from the workforce for childcare
(5.5 years versus just .5 years for men).2 And later in life, women often
take more time out to help care for aging parents (1.2 years versus .6 years).3
Fewer years of earning can translate to shortfalls during retirement.
addition, research suggests women tend to be more conservative in how they invest
the money they do save.4 Overall, women generally own fewer stocks
and exchange-traded funds (ETFs), and their investments weigh more heavily to cash
and money market accounts. This can lead to lower investment yields over time and
less retirement savings overall.
a group, women have been hit harder by the economic impacts of the COVID-19 pandemic
than men. In December 2020, the U.S. economy lost 140,000 jobs — all of them attributed
to women.5 This was partly due to women being overrepresented in service
jobs (e.g., restaurants and retail) but school closures and their impact on childcare
have likely exacerbated the issue.
on average, women live longer than men. In the U.S., they live five years longer
(seven years longer worldwide).6 While options such as cohabitating later
in life or living with children or other relatives are common, many women end up
living alone for years during retirement. Since this is typically more expensive
than sharing expenses with a spouse, partner or roommate, women should factor in
the added cost of living alone when evaluating how much money they’ll need in retirement.
what can be done?
#1: Know Your Numbers
first step toward closing your own retirement gap is gauging how big it is to begin
with. And to do that, you need to know your numbers. Look at your portfolio
performance and its projected balance at retirement, expected Social Security benefits,
anticipated healthcare and other costs of living. Don’t forget to include your debt
in the overall picture. Ultimately, you need to project whether your sources of
income will cover the expenses you’ll incur for the length and type of retirement
you want. If you need help, your financial advisor can help walk you through the
#2: Ramp Up Savings
women often work fewer years, earn less and live longer than men, they generally
need to save more of their income during the years they are working. That means
increasing contribution levels to 401(k), 403(b) or other retirement accounts as
well as making catch-up contributions once they become eligible.
#3: Reevaluate Risk
for women in their 30s, 40s and early 50s who may be more than a decade away from
retirement, weighting stocks more heavily in their portfolio may lead to higher
gains. Higher gains over more years equals more income in retirement. Especially
if you’re more than a decade out from exiting the workforce, speak to your advisor
about whether taking on a little more risk makes sense in your particular situation.
#4: Manage Debt
with debt — from children’s college expenses, medical debt, credit cards, a HELOC
or large mortgage — can make budgeting a lot harder. Take stock of your long-term
obligations and, while you’re still employed, create a plan to reduce or eliminate
that debt well before retirement. Talk to your financial advisor about this in detail.
While they may have access to your retirement account balances, they won’t know
what your debts are unless you tell them. Come up with a manageable program that
keeps you on track with savings, but also frees you from the burden of excessive
#5: Be Proactive
may be no better way to narrow the gender retirement gap than for women to take
an active role in understanding and managing all aspects of their finances, including
their retirement planning. Improve your financial literacy by making an appointment
with your financial advisor to get a clearer picture of where you are now and how
to plan for the retirement you want to someday enjoy.