Building better retirement strategies for women

MUCH of the retirement savings advice offered online, and even by financial professionals, is intended for a wide audience. Unfortunately, it often does not take into account the needs that specific groups, including women, may have.

Because of factors like the wage gap between men and women and differences in financial literacy, women can benefit from retirement advice specifically tailored to their unique experiences. Steps like self-advocacy, financial education and establishing financial building blocks can help them better prepare for retirement. The state of women’s retirement savings

Data consistently shows that women are less prepared for retirement than men. The US Census Bureau’s Survey of Income and Programme Participation (SIPP) found, for instance, that women aged 55 to 66 are more likely than men to have no retirement savings.

Less preparation also means women are at greater risk of running out of money during retirement.

A variety of factors contribute to these trends — and to the overall need for retirement savings advice that is more tailored to women — including longer lifespans, the gender wage gap (in 2022, women made only 82 percent of what men did), the time women may spend outside of the workforce caring for family and other loved ones, and even a lack of financial knowledge and confidence.

Here is a look at how each of these factors contributes to women’s lack of retirement preparation:

1. Women live longer: According to data from the National Vital Statistics System for 2021 (the last year for which data is available), life expectancy in the United States is 76,4 years. But there is a considerable divergence between women’s and men’s life expectancies — women have a life expectancy of 79,3 years, while men have a life expectancy of just 73,5 years.

The nearly six-year difference between men’s and women’s expected lifespans plays an important role in retirement planning for both sexes.

“One risk that threatens women’s retirement security is the unexpected, premature death of a partner,” says Valerie Leonard, a financial adviser and CEO of EverThrive Financial Group in Alabama.

Imagine a married, heterosexual couple that has retired without savings and only their two monthly Social Security cheques to support them. If the husband passes away, the wife has suddenly lost a considerable portion of her household income (even though Social Security will pay her the higher of the two benefits foling lowing the death a Work experiences put women at a disadvantage: Women’s experience with the workforce significantly impacts their ability to save for retirement. First and foremost, women are generally paid less than men. According to the latest data from the US Bureau of Labor Statistics, fulltime working women are paid 83,7 percent of what their male counterparts receive. That disparity exists across all different educational levels and industries.

A second important factor: Employer contributions to employee retirement accounts like 401(k)s are often based on a percentage of wages. For example, an employer might agree to contribute up to 3 percent of each worker’s salary to their retirement plans. That means the higher a worker’s wages, the more retirement contributions they can receive from their employer.

Finally, Social Security earnings are based on a worker’s income during their lifetime. Because women tend to get paid less during their working years, they also receive, on average, only 80 percent of what men receive in Social Security benefits.

3. Time away from work: In addition to a woman’s lower wages, we must also consider how traditional familial responsibilities can impact the ability to save.

According to the Bureau of Labour Statistics, in 2022, 72,9 percent of mothers and 92,9 percent of fathers with children under the age of 18 were either working or looking for work. The discrepancy in these statistics between women and men makes it clear that mothers are far more likely than fathers to exit the workforce while they have children.

During those years when women are not working, they also are not contributing to their own retirement accounts.

Even women who have rejoined the workforce — or never left it to begin with — may see their retirement savings impacted by their family duties. Mothers are more likely than fathers to work parttime and, even when working, are more than 10 times more likely to leave work to care for sick children.

Women’s familial responsibilities often extend past just their children, too.

Adult daughters spend more than twice as much time as adult sons caring for elderly parents. And like women who leave work — either temporarily or permanently — to care for children, devoting time to family instead of working can affect women’s standing at work, their wages and, ultimately, their retirement savings.

4. Many women lack financial confidence: A final factor that may impact a woman’s ability to save for retirement is her financial literacy and confidence — or lack thereof.

The Investopedia 2022 Financial Literacy Study found that women are less confident than men when it comes to their perceived financial knowledge.

While most women (63 percent) said they feel they have advanced knowledge of practical know-how when it comes to finances, only 1 in 3 feel they understand traditional financial products like insurance, investments, and savings — which are key components of retirement planning. In 2023, a Morgan Stanley study found 36 percent of women are not confident they will be able to retire comfortably, compared with just 21 percent of men.

Similarly, US Bank found 46 percent of Boomer women, 53 percent of Gen X women and 71 percent of Millennial and Gen Z women felt confident in their ability to manage their finances, versus 49 percent, 63 percent, and 75 percent of men in the respective generations.

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