From Venus to Mars: The Gender Gap in Retirement

The average retirement age in the United States is 62 for women and 65 for men. Deciding how much money one needs in retirement depends on many factors; one that may be overlooked is gender. Studies show that, for women, there is a real gender gap, with women more likely to need more money for a longer amount of time, but less likely to have it.

According to the U.S. Department of Treasury, recent surveys show that retired women have lower levels of economic security than men, and most prime age working women express a lack of preparedness for future retirement.

Multiple studies also indicate that women are disadvantaged across all retirement resources: compared to men, they tend to receive lower Social Security benefits, own fewer assets, and have lower retirement account ownership rates and estimated retirement account balances.

According to the American Academy of Actuaries, women live longer on average than men and will, therefore, need more assets in retirement. Because women generally have less income from other sources, and non-Social Security assets (which are lower on average than for men) must be spread out over a longer expected lifetime, Social Security benefits are a more significant component of a women’s retirement planning.

In 2021, among elderly women, the poverty rate was 5.8% for those who were married, 15.5% for widows, 17.1% for divorced women, and 19.5% for women who never married. More women reaching retirement now are divorced or unmarried. In every marital status group, women with children had higher poverty rates than women without children (a pattern that does not hold for childless men).

The Pay Gap

Despite historically high labor-force participation rates and gains in educational attainment, women’s labor-market opportunities and outcomes lag men’s, leading to lower lifetime earnings and, consequently, lower retirement savings.

On average, women earn 84 cents for every dollar earned by men, a ratio that has remained unchanged for almost twenty years. Another way to look at it is that the average woman earned just 83.6% of the average man’s earnings in 2023, according to the Bureau of Labor Statistics. The gap is wider for women of color and those with disabilities.

Women earning less snowballs in retirement as most people save a percentage of their income each paycheck for retirement. If you are making less, the amount you are putting into your retirement is lower and there is likely to be an impact on the potential for compounding growth.

Savings

In 2024, women surveyed by the National Council on Aging considered themselves less financially secure and unsure of how to plan and save for retirement than in 2023.

According to Prudential, a survey of 55-year-olds in the United States hold less than $50,000 in median retirement savings in 2024, while 67% of them believe they will outlive their savings. Additionally, women have less than one-third of the median savings of men and are more likely to delay retirement due to caregiving duties

Investing

According to a study from SoFi’s 2024 Women and Finances Survey, overall women are less likely to invest than men, with 64% of women revealing they have never invested.

Without a financial plan that includes investments, women can potentially miss out on the returns that can be earned on their retirement savings over time. According to Fidelity, women are more likely to keep extra money (outside of retirement or emergency savings) in cash instead of investing. Not only is that cash missing out on growth, but it also doesn’t always keep up with inflation.

Caregiving

Women are more likely than men to work part-time and to spend fewer total years in the workforce, often due to taking on unpaid care duties for children and other family members.

While more men are taking on caregiving responsibilities, in 2022, 14% of prime-age women were full-time caregivers compared with 1.5% of prime-age men. In 2022, 21% of women worked part-time compared with 11% of men. Among parents, 22.8% of mothers with a child under six years old and 4.3% of fathers in the same situation worked part-time.

The effects of reduced work hours or a complete exit from the labor force compound over time, significantly hampering women’s ability to save for retirement. Reduced tenure can result in foregone employee or employer contributions, reduced retirement account balances, and often lower wages upon re-entry into the workforce. Loss of other employer-sponsored benefits such as health care can also hinder retirement saving efforts or cause financial hardship due to unexpected events.

Longevity

On average, women live longer than men do, so the need to be financially prepared for retirement is increased.

As of 2023, the average life expectancy for women is 83.1 years, compared to 78.7 years for men. This means that women often need larger nest eggs to achieve the same level of annual retirement income. That’s why, for women, having a retirement strategy in place is so important, yet 57% of women say they don’t have enough income to save for retirement.

Social Security

Social Security provides benefits on a gender-neutral basis. Benefits are based on an individual’s earnings record (top 35 years of income), employment history, and family composition.

However, gender-related differences in the American work culture mean that Social Security provides different levels of retirement security for women and men. This difference in amount can be compounded by the fact that women often retire early and live longer.

Statistically, men and women face different prospects for their future Social Security benefits. According to the Social Security Administration, women typically rely on Social Security benefits for longer periods than men.

In 2020, women who reached age 65 were expected to live, on average, an additional 23.9 years, compared with 21.4 years for men. Women represented 55.3% of Old-Age and Survivors Insurance (OASI) beneficiaries aged 62 or older and 63.9% of beneficiaries aged 85 or older.

The median earnings of women aged 15 to 64 who worked full-time for 50 weeks or more in 2019 were $45,000, compared with $54,000 for men. Correspondingly, the average annual Social Security benefit received by women aged 65 or older was $13,505 in 2019, compared with $17,374 for men. If Social Security did not also provide benefits to spouses, divorced ex-spouses, and surviving spouses of deceased covered workers—most of which are paid to women—the retirement income gap would be wider still.

Conclusion: What Can Women Do?

As far as claiming Social Security, women who can afford to do so may benefit from delaying their application. Every month you wait to claim benefits will increase the amount in your checks until you qualify for your maximum benefit at 70.

You can get up to 32% more per month by doing this. But the downside of waiting is that you must cover your expenses on your own until you’re ready to apply. If you are divorced but married for at least 10 years and not remarried, you may be able to collect on your ex-spouse’s benefits if it’s higher than yours.

As for retirement savings, if you can max out your contribution to your 401(k) or 403(b), you can continue to save (up to the IRS max) in a separate retirement account such as a traditional IRA or a Roth IRA. The same is true if you leave the workforce. Try to keep saving either through a spousal IRA (if you are married) a traditional IRA, Roth IRA or even consider investing in a non-retirement account.

Any of these issues might feel incremental but put together over a period the financial impact could be real. Work with a financial adviser who could model out your retirement with different scenarios to help make sure your plan works for you.