5 Hard Truths About Women and Retirement Security
Estimated reading time: 3 minutes
International Women's Day, originally called International Working Women's Day, is celebrated on March 8th. People from across the world are stepping up this year to #BeBoldForChange by taking groundbreaking action that truly drives the greatest change for women. In different regions, the focus of the celebrations ranges from general celebration of respect, appreciation and love towards women for their economic, political and social achievements. For the occasion, we've gathered some hard truths about women and retirement:
Women are less confident than men about their likelihood of a comfortable retirement.
The 2016 Transamerica Retirement Study revealed that a mere 12% of women are “very confident” in their ability to retire and live comfortably. Nearly half of them (46%) are “not too” or “not at all” confident that their lives after retirement will be comfortable.
Women also are more concerned about the future of Social Security. Eight out of 10 believe that Social Security will not be there for them in retirement. Given that 29% of women expect to rely solely on Social Security, that is troubling. And even if Social Security is there for them, those payments are intended to replace only 40% of the average earner’s wages. Relying on Social Security alone means a greater likelihood of living in poverty and discomfort.
Most women plan to retire after age 65 (or not at all) and most of them do not have a back-up plan if they do have to retire early.
This is one truth that applies equally to women and men. The majority of both men and women plan to work beyond the traditional retirement age of 65, or don’t plan to retire at all. Both sexes also plan to work part-time (40% of women; 39% of men) or full-time (11% of women; 13% of men) after retirement.
And of course, sometimes things don’t go according to plan. If forced to retire early—ill health, family obligations, job loss—few women (21%) or men (30%) in the Baby Boom generation have a plan in place to bridge their retirement savings shortfall.
Women do not save for retirement at the same pace as men.
This starts with the sad fact that women earn less than men.
- On average, women earn 79¢ for every $1 earned by men. Over a career, that creates a $300,000 wage gap.
- Two out of five women employed outside the home earn less than $30,000 a year; three out of five earn less than $40,000.
In addition, more women (28%) than men (13%) work part-time, which means lower wages and fewer opportunities to participate in 401(k) plans. When women do have access to a 401(k) plan, they don't participate as often as men (76% of women participate; 82% of men). Even when they do participate, their average contribution (10.1%) trails that of their male co-workers (10.7%).
Finally, the time women take out of the workforce to raise a family means they have fewer years of employment to save for retirement. Over a complete career, women work an average of 27 years, compared to 40 years for men. This gap often results in significantly less retirement savings.
Women outlive their retirement resources more often than men.
The average life expectancy for a woman is 80 years, five years longer than a man’s. This means her retirement savings—already an average of $10,000 less than a man’s—will have to last longer. It also means that they outlive their spouses. The death of a spouse is often accompanied by a drop in income when pension and even Social Security benefits are reduced.
It’s never too late for a woman to improve her retirement savings plan.
You may never be able to catch up on all the lost years of retirement saving, but depending on your age and circumstances, you can always do something. The first step is educating yourself about your retirements savings options:
- Enroll and contribute to your employer’s 401(k) plan if you’re in the workforce. Even better, contribute enough to earn the employer matching contribution. You lower your taxes today and build a nest egg for the future.
- Open a self-directed Traditional or Roth IRA. Anyone can do this, and people age 50 and older get to make “catch up” contributions that allow you to put more money away for retirement.
Get in touch with us today to learn about how self-directed IRAs can help you plan for your retirement. It's time to #BeBoldForChange!