Gender Inequality

Still Shortchanged: An Update on Women’s Retirement Preparedness

While most Americans struggle to save for retirement, women face even higher hurdles

“Still Shortchanged: An Update on Women’s Retirement Preparedness,” is a study conducted by The National Institute On Retirement Security. Access full report here.

While most Americans are struggling to save for retirement, women face even higher hurdles, largely stemming from the gender pay gap that eventually becomes a retirement wealth gap. Older women receive about 80 percent of the retirement income older men receive, a disparity that mirrors the gender pay gap.

Still Shortchanged: An Update on Women’s Retirement Preparedness finds that median household income for women aged 65 and older in 2016 was $47,244 or 83 percent of median household income for men, which as at $57,144. The research also finds that caregiving, especially spousal caregiving, has a more detrimental economic impact on women, while divorce makes retirement more difficult for women.

This report details the inequalities in retirement savings between men and women, examines the sources of income for men and women in retirement and the ways in which they differ, and considers specific factors that are more likely to negatively impact women, such as divorce and caregiving responsibilities. The analysis was developed using data from the 2014 Survey of Income and Program Participation (SIPP), a household-based survey featuring a nationally representative sample interviewed over a multi-year period.

Industrial Influence

Different industries also offer access to different types of retirement plans. Those who work in public administration are most likely to be offered a defined benefit (DB) plan, either alone or with a defined contribution plan. Meanwhile, those who work in the finance and insurance industries are most likely to be offered a DC plan, with just over half only being offered a DC plan and another quarter being offered both a DC and a defined benefit plan.

Those who work in the Accommodation and Food Services industries are most likely to not be offered a plan at all, with more than half of these workers not being offered a plan through their employer. This variation in access to retirement plans by industry is true for both men and women, i.e., men and women who work in the same industry have similar access to different types of retirement plans. However, which industries men and women work in varies more widely

Life Span Influence On Retirement Income

When considering gender differences in retirement income, it is important to remember that women typically live longer than men, so their costs over their lifetime are higher because they have to pay for more years of retirement and they spend more years being single in retirement. Healthcare costs and housing costs are two of the largest costs older women will face, and housing inequality is increasing for older Americans. Older women pay for more years of retirement with less money, which is why widows are particularly vulnerable.

According to the study data, 97 percent of older married women are living with someone, whereas 92 percent of older not-married women are living alone. This means these women have to bear more financial burdens by themselves. Once an older woman loses her spouse, she may have some reduced costs, but she also likely receives less total income, even with any survivor income she may receive. A widow also may have lost financial resources if her spouse incurred large end of life costs before passing.

Impact Of Divorce

Women’s retirement outcomes are determined largely by the social and economic structures in which they live...

Divorce poses a major challenge in terms of retirement savings for women. The data suggest that the timing of a separation and/or divorce matters. If it happens early in a woman’s life, she may have time to accrue her own retirement savings according to the data. Looking at women ages 18-64, married women fare the best in terms of retirement preparedness, followed by widowed women and divorced women. Separated women of working age do poorly by comparison.

Married women are better off in terms of retirement savings as compared to single women, but marriage presents its own retirement challenges. The structure of Social Security works against dual-earner couples. Social Security currently provides a spousal benefit of up to 50 percent of the working spouse’s benefit to the non-working spouse.

Much of the retirement savings infrastructure in the United States was established at a time when fewer women worked outside of the home, meaning they relied on a spousal benefit for their retirement income. Now, older women will only spend about half of their adult lives married. According to the Center for Retirement Research (CRR), “the percentage of women in their 50s who report being married has been declining steadily over the last 40 years. Divorce is the main factor, but there has also been an increase in the number of women who have never married

The impact of divorce is significant and lingers. Divorce is costly, and it also can lead to the division of retirement assets that then fail to grow as much as they would have otherwise.

Caregiving And Retirement Savings

Caring for a child, grandchild, parent, or ailing spouse can widen the already substantial gender wealth gap. Women are more likely to be caregivers, and caregiving makes it more difficult for people to save for their own retirement. Caregiving often is unexpected, for instance, when a parent or spouse falls ill. Women are more likely than men to provide care (60% of caregivers are women), and they typically will spend more time caring for someone else when a couple takes on such responsibilities.

Women often cut back on their hours at work or leave the workforce to handle the time consuming, physically and often emotionally demanding caregiving work. Also, women could lose access to employer-sponsored retirement plans during caregiving. In terms of earnings, women who are caregivers often have lower earnings because of social pressures, cultural expectations, or discrimination. Lower earnings also means decreased tax incentives to save for retirement.

All forms of caregiving go along with a worse gender retirement savings gap. Because women still tend to provide more such care, they are more likely to experience any negative savings effects from caregiving, thus widening the gender wealth gap.

The World In Which A Woman Lives

Women’s retirement outcomes are determined largely by the social and economic structures in which they live. The gender pay gap follows women during their careers and into retirement. Saving adequately for retirement is a challenge for all Americans, but women face unique difficulties. As Congress considers whether and how to expand Social Security, adjusting the spousal benefit and providing caregiving credits in Social Security should be priorities.