What is the Financial Outlook for Women Planning for Retirement?
The gender landscape across American industries is evolving. Today, women continue to make up nearly half of the workforce in the United States.1They own more than 12 million businesses2and are the sole or primary breadwinners for 42 percent of families with children under 18.3
But, as women experience growth in their professional lives, what is their financial outlook for life in retirement, and are they prepared for it?
Women in Retirement Factors: Longevity
One factor that women should consider is longevity. The Social Security Administration’s data shows women are living longer than men. A woman who turned 65 in 2019 can expect to live, on average, until age 86.5. For men, that average age is 84.0.4
In fact, people are having longer life expectancies overall. The administration reported about one of every four 65-year-olds today will live longer than age 90, and approximately one out of seven will live past age 95.4
If you plan to retire in your mid-sixties, that’s potentially 30 years of living expenses and other essentials that need to be taken into consideration.
Women in Retirement Factors: Sandwich Generation
Women could encounter additional obstacles and challenges that factor into their financial planning for retirement. Some of them might fall into the category known as the “sandwich generation.”
This generation is an emerging family dynamic where middle-aged Americans are trying to save for retirement, while also trying to care for both children and aging, elderly parents.
It is estimated nearly half of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child.5 This could put a financial squeeze on some households, especially where women are the main breadwinners or providers.
Women in Retirement Factors: Gender Gap
Another challenging factor for women as they financially prepare for retirement is the gender gap. Some women may choose to leave the workforce or take an extended leave of absence to raise children or care for elderly relatives. A potential consequence of this is fewer years in an employer-sponsored retirement account.
A Bank of America/Merrill Lynch and Age Wave study found 54 percent of women surveyed took a leave of absence after becoming a parent, compared with 42 percent of men.6
Many women could be making this workforce decision in their late 20s to mid-30s, which leads to the issue of the gender pay gap. According to the National Bureau of Economic Research, between ages 25-45, the gender pay gap for college graduates, which starts close to zero, widens by more than 50 percent before narrowing again as women near retirement.7
Even at the highest executive level, gender parity issues are still prevalent in the workforce. A 2020 Global Gender Gap report from the World Economic Forum showed the U.S. has only 21.7 percent of women in companies’ board of directors. The two top countries were France and Iceland with 43.4 percent and 43 percent, respectively.8
Tips for Closing the Gap
Women can focus on closing this income gap by joining and contributing to employer-sponsored retirement plans. They can also take full advantage of matching programs that can be a path to catching up on lost time or income. Additional safe-money options are available for alternative income solutions that offer tax deferral, without contribution limits and allow for expedited nest egg growth.
Here are five helpful ways women can start to save more for retirement.
1. Get started, even if it is a small step. The earlier you start to plan for retirement, the better off you will likely be.
2. Take the time to do your research and find the retirement income options that are right for your individual needs.
3. Plan out your budget, including building or automating savings into it.
4. People are living longer. Calculate what you might need for potentially 30 years in retirement.
5. Money and retirement income don’t have to be taboos that women are afraid to talk about. Your long-term financial health is important and should be openly discussed, whether it’s with a financial professional, spouse, family member or trusted friend.
Preparing for Lifetime Income
For both men and women, the No. 1 goal of working pre-retirees is securing lifelong income. 9 If you have concerns about longevity and finances in retirement, a variety of retirement insurance products are available that are specifically designed to ensure guaranteed income for life, which may offer increased liquidity options under qualifying circumstances.
Safe money options like fixed index annuities can offer lifetime income options that protect years of hard-earned dollars and can generate a stable source of income that cannot be outlived.
Retirement goals are unique and individual needs vary from woman to woman. Talking to a qualified financial professional can help identify a long-term plan and options that will work best for you.
- Footnote1United States Department of Labor, Women’s Bureau, Labor force participation rate of women by age, 1948-2016 annual averages↩Return to top of footnotes
- Footnote2“2018 State of Women-Owned Businesses Report,” Commissioned by American Express. 2018↩Return to top of footnotes
- Footnote3Center for American Progress, “Breadwinning Mothers Are Increasingly the U.S. Norm,” by Sarah Jane Glynn. 2016↩Return to top of footnotes
- Footnote4Social Security Administration, “Benefits Planner/Life Expectancy”↩Return to top of footnotes↩Return to top of footnotes
- Footnote5Pew Research Center, “The Sandwich Generation: Rising Financial Burdens for Middle-Aged Americans.”2013↩Return to top of footnotes
- Footnote6Bank of America/Merrill Lynch and Age Wave, “Finances in Retirement: New Challenges, New Solutions,” 2017↩Return to top of footnotes
- Footnote7National Bureau of Economic Research, “The Dynamics of Gender Earnings Differentials: Evidence from Establishment Data” 2017 (Using Census Bureau databases, 1995 to 2018)↩Return to top of footnotes
- Footnote8World Economic Forum, “Mind the 100 Year Gap” 2020↩Return to top of footnotes
- Footnote9IALC, “Retirement Readiness Survey.” 2018↩Return to top of footnotes
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