Women Tend To Be Less Prepared For Retirement. Here’s How We Can Fix That

Supermajority Education Fund

May 28, 2020

Divorce and the gender wage gap play a role in why women are less prepared for retirement than men, a new report from the National Institute on Retirement Security reveals. While many Americans struggle to save for retirement, “women face unique challenges in saving, largely stemming from a gender pay gap that persists into a retirement wealth gap,” the report notes.

The report found that the average woman’s median post-retirement household income is $47,244, 83 percent of the median household income for men at $57,144. The disparity is attributed to the fact that women make significantly less than men throughout their careers and women’s marital status. Specifically, married retirees fared better in retirement than people who were never married, divorced, or widowed, according to the report. This is in part because systems like social security were created when many women did not work outside of the home.

“Many times, women will change careers for their children, or take time out of the labor force for caregiving,” Zach Moller, an economist at the think tank Third Way, told Supermajority News. “As a result, they don’t have a steady career path.”

This contrasts with what happens to the average man’s career after starting a family. “Men typically don’t change careers when they have children and historically have benefitted from being married,” and having a spouse manage the home, Moller noted. “Those antiquated factors just continue to flow into today.”

The racial wealth gap is also present in retirement, the report found, with retired Black and Latino Americans more likely to be poor. While Black Americans make up only 9 percent of Americans over 65, they are 13 percent of older people living in poverty. Because women of color make less than the population at large, “that inequity would continue down the line,” said Moller. Women of color are also disproportionately represented in the service industry, which means they are often ineligible for employee benefits like 401k plans. 

But there are ways to address these gaps from a policy perspective. “Social Security is the first bedrock of retirement savings, especially for working-class and middle-class Americans,” Moller said. To ensure women are not penalized when they take time off, the government could provide “credit for caretaking responsibilities,” he explained. “If you have to drop out of the labor force for a year to care for an ill parent, that is one less year that you are earning money for Social Security.”

Moller says more also needs to be done to provide benefits for the very old. “The older you are, the more likely it is you tend to outlive whatever it is you have saved for retirement. Those Americans who are 85 or 90 or older may need a higher social security benefit because they have run out of their savings,” he noted. “Given the fact that women, on average, live longer than men, an old age bump up would be more helpful to women.”