You’re Already Behind – And It’s Not Your Fault: Closing The Retirement Gender Gap
You’ve heard of the gender pay gap – but there’s a quieter crisis unfolding for millions of women: the retirement gender gap. Whether you’ve stepped out of the workforce to care for a loved one, are a Gen X’er racing toward retirement with less saved than you’d like, or you’ve recently lost a spouse and suddenly find yourself managing finances on your own, it’s likely you feel left behind. The good news? You don’t have to stay there.
Recently, two experts from LIMRA – Chief Marketing Officer Tina Beckwith and Retirement Income Institute Fellow Suzanne Norman – joined the HerMoney Podcast to break down why women face a steeper climb to retirement security, who’s most at risk and most importantly, what you can do right now to start closing the gap.
WHY WOMEN START BEHIND
The retirement gender gap doesn’t have a single cause; it has several. First, there’s the traditional gender pay gap, with women earning less than men over their lifetimes. Then, there’s the longevity factor – women typically live longer than men and need to fund more years of retirement. Layered on top of both is the caregiving part of the equation. Women are more likely to step back from their careers to raise children or care for aging parents. That alone comes at an average cost of nearly $300,000 in lost earnings over a lifetime.
WHO’S AT RISK
Three groups face an especially significant retirement gender gap:
- Solo agers
- Gen X’ers
- Caregivers
What do they have in common? For many, there’s a significant gap in financial confidence. Think about it – women’s financial power is historically recent; for example, the Equal Credit Opportunity Act wasn’t passed until 1974. That lack of confidence can also hold women back from investing as they should, with numerous studies showing women are less confident investors than their male counterparts (though when we do invest, we’re actually better at it).
“When we think about feeling confident, that’s harder for women, and it shows up in some very real ways,” says Beckwith. “They have a real fear about outliving their savings.”
IF YOU’RE AGING SOLO
Single women – whether by choice, circumstance, divorce, or loss – are among the most financially vulnerable. “When we think about the single woman, they’re paying for a full lifestyle – there are no shared costs,” says Norman, pointing out that single women are at a greater likelihood of falling into poverty. Not only are many facing challenges with making ends meet, but a growing number of widows are also handling household finances for the first time following the loss of their spouse.
Regardless of why they are aging solo, nearly half of single women say they feel “very far from where they need to be.” The path forward, for many, starts with getting concrete and knowing your numbers – including what you can expect your healthcare costs to be in retirement. The average out-of-pocket healthcare cost for a woman retiring at 65, excluding long-term care, is $300,000. A daunting figure, but one you need to be cognizant of. “Knowledge is power,” adds Norman. “We can take action towards a goal knowing what it is. If we can start earlier, managing some of these expenses…it’s going to be much more doable.”
IF YOU’RE A GEN X’ER
Gen X women are at a particularly pivotal moment – close enough to retirement to feel the pressure, yet with enough runway to make meaningful changes. Despite this, recent research shows only 64% of women feel confident they can achieve their desired retirement lifestyle — compared to 68% of Gen X men.
The key to closing the confidence gap is resisting the urge to throw in the towel before you’ve given yourself a chance to get on the right track. “They might feel like they’ve missed their window, but the reality is that maybe they just haven’t had the clarity yet,” says Beckwith. “They can build their confidence by creating that plan and knowing where they are – and where they want to go.”
IF YOU’RE A CAREGIVER
Caregiving and Gen X overlap significantly and the financial toll is steep. Women are more likely than men to leave the workforce to care for children, aging parents, or other loved ones. Aside from the financial impact, there’s a mental cost, too. “There’s a huge psychological impact and that has ripple effects,” says Norman.
One of the biggest things for women in this category to remember is that they don’t have to do it alone. Don’t be afraid to call on your siblings to pitch in with care for your parents, and don’t forget to ask your employer about caregiver benefits. “A lot of times, there are extra resources now, with this generational shift,” adds Norman. “I would just recommend that people recognize they can’t go it alone.”
It’s also worth doing the math on caregiving vs. working. Would hiring some help allow you to stay in the workforce – maintaining your seniority, continuing to contribute to your retirement accounts and accumulating Social Security credits? For some women, paying for support is actually the smarter financial move.
CLOSING THE GAP STARTS WITH A PLAN
No matter which category you fall into, the path forward is the same. Start with a plan, and don’t overcomplicate it. The easiest first step is to begin with a budget if you don’t have one already.
“Just figuring out what is coming in the door every month and what is leaving – that’s the most important thing for people to really get a handle on,” says Norman. “Once you’re clear on your budget, it gives you a lot more control to figure out where there’s a little leakage.”
DON’T OVERLOOK PROTECTED INCOME
Once you know your budget, think about what income sources you’ll have in retirement and don’t forget to factor in protected income. Also called “lifetime income,” protected income comes in several forms: Social Security, pensions and annuities.
LIMRA research shows that 75% of women believe protected income is important, but only 39% understand how annuities work. Here’s the simple version: you make an investment, and in return, you receive a regular paycheck that can help cover your ongoing living expenses.
There are two main types: fixed annuities (a guaranteed rate of return) and variable annuities (market exposure with more growth potential). “Both at the end of the day have, by contract, the guarantee to pay you income you can’t outlive,” explains Norman.
That guarantee is valuable, especially for women who statistically need their money to last longer. “They can play a really important role for people who value stability, want protection over longevity, and that simple peace of mind when they retire,” adds Beckwith.
THE BOTTOM LINE: TAKE ONE STEP TODAY
Whether you’re a caregiver, a solo ager, Gen X’er, or someone who just hasn’t looked at her retirement account in a while, know that it’s not too late.
“It can feel overwhelming, but the gap can be manageable,” says Beckwith. “Little things like adjusting your timeline or making smarter use of what you already have can make a really big difference. The most important thing is taking that first step to start.”
That means finding the right help. “Find a financial professional who has that experience and the credentials and who you can trust and feel confident in partnering with to make your financial decisions,” adds Beckwith.
And, let go of the pressure to have it all figured out before you begin. “We all know men will say, ‘Sure, I don’t know anything – I’ll take that job,’” says Norman, who encourages women to learn as they go. “I think you will find you know more than you do.”
Learn more: Women – and especially widows – often want a trusted partner to help navigate retirement decisions. Here are 7 key tips they can keep in mind when looking for a financial professional.