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Why Women Outlive Men but Save Less for Retirement

Lower pay, fewer promotions and career breaks to have children make saving difficult; as a result, the poverty rate for older women is rising

By Terri Williams

Women live longer than men after the traditional retirement age of 65 — 18% longer, on average — yet women save less than men do to support themselves in retirement, Census Bureau data shows.

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Women hold nearly-two thirds of the nation's student debt and, probably because they are paid less, it takes them about two years longer than men to repay the loans.  |  Credit: Getty

About half of all women aged 55 to 66 have no personal retirement savings at all; the same is true for 47% of men, Census says. The difference is greater for people who have saved at least $100,000 for retirement: only 22% of women surveyed reached that modest goal, compared with 30% of men.

Longer lives and less savings may help explain why poverty is more prevalent among older women than older men. According to Census Bureau data, 16.1% of American women 75 and older live below the poverty line, which is $14,580 for an individual in 2023, compared with 9.1%.of men that age.

Why do women not save as much as men? What can women do to catch up? And what can society do to help?

Why Women Save Less for Retirement

There's no single reason why women generally tend not to save as much for retirement as men. These are just some of the factors:

A persistent wage gap leaves them with less to invest. Pew Research data shows that women earn 82% of what men earn for the same or equivalent work, although the gap is narrowing — it's 92% for younger women (aged 25 to 34).

"Women with bachelor's degrees who work full time make, on average, 26% less than their male peers."

When the nonprofit, nonpartisan National Partnership for Women & Families analyzed Census Bureau data on women who work full-time or part-time and those who take time off to be a caregiver, it found that women only make 78 cents for every dollar that men make.

Comparing women of color to white men, the wage gap widens. Black women are paid 66 cents and Latina women 52 cents for every dollar that white men make for comparable work. Asian American women are the closest to closing the gap, making 89 cents.

Having a college degree does not make a significant difference. "Women with bachelor's degrees who work full time make, on average, 26% less than their male peers," says Melody Evans, a TIAA wealth management advisor.

Student loan debt is another reason women do not save as much. Evans says women also hold nearly-two thirds of the nation's outstanding student debt and, probably because they are paid less, it takes them about two years longer than men to repay the loans.

The Cost of Caregiving

The financial costs of caregiving falls primarily on women, further inhibiting their ability to save. "Family caregivers spend about 26% of their income on caregiving activities, according to AARP, and this disproportionately impacts women," Evans says. She adds that a large majority of caregivers are women and they spend much more time providing care than men.

"Much of the time women spend caregiving is during a stretch of their careers when men often receive some of their biggest promotions and pay raises," she add.

Lack of diversity among financial advisers also contributes to lower savings rates among women. Evans notes that less than one-fourth (23.7%) of financial advisors are female which inhibits women from investing for retirement.

The underrepresentation of women and people of color in the field "can make it more difficult for women to meet with someone who better understands their needs and can tailor a plan that will help them achieve their short- and long-term financial goals," Evans explains.

Changing lifestyles have an effect, too. Women are more likely than men to be single later in life — about half of all women aged 65 and older are without a partner, according to Pew research.

Part of the reason there are so many single women aged 65 and over is that men do not live as long as women. Men who reach 65 will, on average, live for another 18 years and 9 months, according to Census Bureau data. Women at 65 are likely to live another 21 years and 4 months.

Single women tend to earn less than women in committed relationships, making it more difficult to save. Pew Research trends show that in 2019, single women (neither married nor living with an unmarried partner) between 25 to 54 had median annual earnings of $32,000 while partnered women earned $40,000. In addition to earning less, unpartnered women are the sole household bill payers.

What Women Can Do

Stephen Chang, managing director at Acts Financial Advisors in McLean, Virginia, says not all is gloomy. While Bank of America's 2023 Financial Life Benefits Impact Report states the average 401(k) account balance for men is about 50% greater than for women ($89,000 vs. $59,000), younger women have narrowed the gap to about 23% in their age group.

"Frontloading retirement savings before marriage and before having children will allow compounding to work more strongly in their favor."

"Some ways that women can ensure a larger retirement account are to begin saving earlier and to save a higher percentage of their paycheck," Chang advises. "Frontloading retirement savings before marriage and before having children will allow compounding to work more strongly in their favor."

Now, more good news. Women can close the $30,000 gap between men's and women's 401(k) savings cited by Bank of America if they start investing at 21 and set aside only $217.95 a year for five consecutive years (assuming an 8% average annual return, Chang adds).

Melody Evans, a TIAA wealth management advisor, says her firm has launched a Retire Inequality campaign to draw attention to the need for women to save sooner and save more. "The sooner you start saving for retirement," she explains, "the sooner your money will compound."

Do Not Wait to Save

Evans recommends having money deducted from your paycheck and deposited directly into the retirement account. "Some women may prefer to wait and save whatever is left over at the end of the month," she adds, "but if you take that approach, you'll never get started."

"Some women may prefer to wait and save whatever is left over at the end of the month, but if you take that approach you'll never get started."

To illustrate why it is wise to start saving early and maximize the power of compounding, Evans compared two hypothetical investors. The people are made up, but the numbers are real.

"Let's say you have two women who both turned 65 last year," she begins. "The first one started saving for retirement when she was 25, roughly the same age as today's younger Millennials, and she set aside only $100 a month — that's $25 a week."

On the other hand, the other women waited 10 years later to start saving for retirement. "At that point," Evans says, "she was 35 — the same age as today's older Millennials, but when she started saving, she set aside twice as much money as the first woman. It wasn't $100 a month — it was $200 a month."

If both women put their money into the S& P 500, about 40 years later, the woman who started investing at 25 would have more than $400,000. "The woman who waited an extra 10 years and invested twice as much money would have barely $300,000 — a difference of about 25%."

Some employers match what their workers save for retirement — and it can be up to 3% to 5% of your salary. "So, if you make $55,000 a year and save 3% of that salary, your company could match that 3%," Evans explains. "That would be $1,650 from you and another $1,650 from them, but if you don't save that full 3%, though, you're leaving free money on the table."


Find Lifetime Income

Regardless of how much money women save, once they retire, it's not a good idea for them to haphazardly withdraw funds from a 401(k) or other private savings plan and hope they don't outlive their money. Since women tend to live longer in retirement than men, Evans says there's an increased chance that might happen.

Instead, she recommends that women find one or more income streams that will last the rest of their lives. She cites three options. One is Social Security, "but that's often not enough by itself." Another is an employer pension, but Evans notes they are becoming rare. The third is annuities, which guarantee a flat monthly payout for as long as you live in exchange for payment up front. A growing number of workplace retirement plans offer annuities as an option. Fees vary widely, so choose carefully.

Evans tells women to look at annuities this way: "When you're younger, you need life insurance in case you die too soon; but when you're older, the concern flips, and you need income based on how long you may live."

How Society Can Help

Women can take some steps to save more for retirement, but many of the issues that influence how much they invest are out of their hands. However, our team of experts had several solutions:

Paid Family Leave: Many U.S. companies have policies that appear to penalize women for having children, but the country's future depends on a robust birth rate. "Enactment of more generous policies for short-term disability for pregnancy and paid family and medical leave would go a long way," says Chang.

Equal Pay: Until they are paid as much as men for doing the same job, women will find it difficult to invest more. "Stricter legislation and enforcement of equal pay for equal work is needed to help even out the playing field," Chang says.

Paul Miller, managing partner and CPA at Miller & Company in New York, says addressing the gender wage gap is crucial. "Tax policies could be designed to incentivize companies to pay equitable wages to men and women for the same work," he says, adding that implementing transparency in pay practices can also help narrow the gap.

New Retirement Plan Limits: Miller also notes that in many countries, retirement plan contribution limits are the same for both men and women. However, he believes limits should be reevaluated to account for the fact that women tend to live longer. "Adjusting contribution limits to allow women to save more on a tax-advantaged basis can help them build larger retirement nest eggs," he says.

Spousal IRA Contributions: Miller also recommends encouraging married couples to take advantage of spousal Individual Retirement Accounts (IRAs), where one spouse can contribute to an IRA for the other spouse, who may not have earned income. "Tax incentives, such as tax deductions or credits, could be provided to incentivize these contributions," he says.

Caregiver Tax Credits: We've noted that women often take on caregiving responsibilities, which can impede their ability to work outside the home and save for retirement. "Implementing caregiver tax credits that provide financial relief and incentives for women who take time off work to care for family members can help mitigate the retirement savings gap," Miller says.

Progressive Tax Rates: Changes to the tax code can also help women save more for retirement. "Progressive tax rates that take into account income disparities can help address gender income inequality," Miller explains. "By taxing higher incomes at a higher rate, governments can generate more revenue that can be invested in social programs and services, including those that support women's financial well-being."

Financial Literacy Programs: Increasing financial literacy for women is a crucial step that society can take to help close the gender retirement savings gap.

"Along with workplace equity and equal pay, we must also provide accessible financial education resources to empower women with the knowledge and skills necessary to make informed financial decisions."

"While it is essential to acknowledge the progress that has been made in recent decades toward gender equality in the workforce, it remains a fact that women often have less financial education overall, primarily due to disparities in their time spent in the workforce," says Sean Casterline, a wealth manager for Delta Capital Management in Orlando, Florida.

The combination of wage gaps, career interruption, and limited access to leadership roles are all factors that have resulted in less exposure to financial literacy opportunities. "Along with workplace equity and equal pay, we must also provide accessible financial education resources to empower women with the knowledge and skills necessary to make informed financial decisions," he says.

Miller agrees, and says tax incentives could be provided for companies or organizations that offer financial education and literacy programs, with a particular focus on women. "Improved financial literacy can empower women to make informed decisions about their retirement savings and investments," he says.

Earlier this year, TIAA issued a Retirement Bill of Rights, outlining the challenges facing people of all genders, races and ethnicities, as well as the steps policymakers and employers can take to address them.

Expand Savings Programs

"It urges more states to follow the lead of those that have created options for workers who aren't covered by an employer plan and suggests that Congress join them and adopt a federal plan," Evans explains.

The bill also recommends that employers automatically enroll workers in retirement plans and increase their annual contributions. "It also proposes that policymakers should make it easy for workers to access simple, in-plan solutions that allow them to convert their savings into guaranteed lifetime income," Evans says.

Casterline says he believes there is plenty of room for improvement.

"Retirement plan providers have done a poor job guiding investors in retirement plans — it's systemic," he says. Often, large companies don't want to get involved in giving specific investment guidance to participants. "They see it as a risk to the company if markets turn down," Casterline explains, "but if an investor is confused about how to participate and how to invest, they back away."

Terri Williams
Terri Williams has over 10 years of experience writing about student loans, mortgages, real estate, budgeting, home improvement and business in general. Her work has appeared in The Economist, TIME, Forbes, Architectural Digest and Read More
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