Talking about the differences between men and women can quickly lead to discussions that can border to parody if they don’t reach full-out offensive. But, as an employer, there is one gendered discussion you should have with your staff. According to multiple reports in 2019, there is a significant difference between the average retirement savings of men and women in America.
This difference in income during retirement is commonly referred to as the gender pension gap. In this article, we’ll explain what exactly this gender pension gap is and why it exists. And, tune in next week when we’ll cover several methods your company can use to shrink this retirement savings shortfall.
What is the Gender Pension Gap?
As previously mentioned, the difference between the average man and woman’s savings for retirement is referred to as the gender pension gap. According to a 2019 report by the Employee Benefit Research Institute (EBRI), the average retirement savings shortfall for women is nearly twice that of men. Per the study, single women have an average retirement savings shortfall of $72,883 versus $37,690 for single men.
Similarly, according to the Social Security Administration (SSA), of those who receive Social Security benefits, unmarried women rely on Social Security for 45 percent of their total income, compared to 23 percent for unmarried men and 27 percent for couples.
And it’s not just third parties who believe the average woman is at a disadvantage when it comes to saving for retirement. Per a recent Financial Finesse survey, 31 percent of women believe they’re on target for retirement, compared to 38 percent of men. So, now we know what the gender pension gap is, but what are the reasons behind this gap?
Why Does the Gender Pension Gap Exist?
Depending on who you ask, you’ll receive multiple different explanations on why the average woman in America has saved less for retirement than the average man. That being said, here are 10 of the top reasons why the gender pension gap exists.
1. Women Tend to Live Longer
The first reason behind the gender pension gap is the simple fact the average woman in America lives longer than the average man. According to the Kaiser Family Foundation (KFF), the average life expectancy of Americans, as of 2017, was 81.1 years for women and 76.1 years for men.
Additionally, a 2019 study from Corporate Insight found by age 85; women outnumber men in the U.S. by a factor of two to one. As evidenced by this data, women in America need to create a retirement strategy that includes the chance they live longer than they may even expect.
2. Women Are More Likely to Outlive Spouses
As previously stated, women are more likely to live longer than men. So, it’s only natural that women in America are also more likely to outlive their spouses than men. In fact, according to the Corporate Insight study, 77 percent of widowed spouses in the U.S. are women.
The Center for Retirement Initiatives at Georgetown University recently broke down exactly how much longer the average woman can expect to outlive their spouses. For a couple reaching age 65, the woman will outlive her husband by 11.5 years on average. Notice this number is significantly larger than the 5-year difference between the average expected lifespans of men and women in the U.S.
This difference is primarily due to age gaps between married men and women. So, married women need to know there’s a significant chance their spouse passes away before them. Subsequently, these women need to prepare a retirement plan that includes the possibility of outliving their spouse.
3. Women Typically Spend More Time and Money as a Caregiver
It’s far more likely women will spend, at least some, time as a caregiver. According to BenefitsPro, more than 75 percent of women are caregivers. Similarly, even if men do provide care, women may spend up to 50 percent more time doing so.
Plus, because more women act as caregivers, it’s more likely the average woman costing themselves money due to a break from work to be a caregiver. Similarly, the average caregiver spends almost $7,000 each year towards caregiving, according to BenefitsPro, which reduces their opportunity to save for retirement.
4. Women Are More Prone to Physical Limitations
Despite the average woman living longer, the average woman in the U.S. is more likely to be prone to physical limitations than men. Women, per BenefitsPro, are both more prone to difficulties with activities of daily living (ADL) and have more problems as they age. Of men aged 65-74, 13 percent reported being unable to perform at least one ADL.
This percentage rose to 40 percent when surveying men ages 85 and over. Conversely, 19 percent of women aged 65-74 were also unable to perform at least one ADL. And of women ages 85 and over, this percentage rises to 53 percent.
5. Women Are More Likely to Be Depressed
According to a 2008 study, older women are both more likely to suffer from symptoms of depression and more likely to stay depressed for a more extended period than older men. In total, 16 percent of older women reported being depressed compared with 11 percent of men.
Additionally, older women may be at a greater risk of suicide than their male counterparts. A 2018 study by PBS, using the Centers for Disease Control data, indicated as much. Per the study, the age group among women most at risk for suicide is for those between 45-64.
6. Women Tend to Accumulate More Debt
Women, in general, tend to accumulate more debt throughout their life than men. This accumulation of debt is especially prevalent for women who attend college. While women make up 56 percent of all college students, they hold 65 percent of the country’s student loan debt. Women are more likely to accumulate more debt during college because they’re more likely to be balancing school with familial responsibilities, which extends their graduation date.
7. Women Are Less Likely to Participate in an Employer’s Retirement Plan
The average woman is much more likely to work part-time jobs than the average man. This contrast has a two-pronged effect on the retirement savings for women. First, working part-time means women are making less overall income because they’re working fewer hours.
Additionally, most part-time employers don’t have access to their employer’s retirement savings plans, which is one of the most common paths to saving for retirement. But even amongst those who are working full-time and had access to an employer’s retirement plan, women are typically savings less than men. Women, on average, contributed a median 7 percent of their salaries, compared with 10 percent for men.
8. Women are Less Likely to Save and More Likely to Save for Less Time
In general, per the previously mentioned study by Corporate Insight, women are less likely to save for retirement. Only 54 percent of women said they were saving for retirement, versus 62 percent of men. Similarly, even if they are saving, the average woman is saving less than the average man.
Women in this survey had an average of $115,412 saved versus an average of $202,859 saved for men. Also, according to a 2019 Transamerica study, found 68 percent of women were saving for retirement through employer-sponsored plans or outside the workplace, compared to 81 percent of men.
9. Women Tend to Take Fewer Risks When Investing
Per research from Mercer, women have less financial courage and are less confident about their financial security than men. These findings mean women are less confident about taking control of their finances and tend to take fewer risks when choosing specific investment funds. Because of this, women are less likely to choose aggressive, growth-targeted strategies which can lead to them missing opportunities for long-term growth.
10. Women Make Less Money
The final, and arguably most significant reason behind the gender pension gap is the fact that, on average, women are simply paid less than their male counterparts. According to data collected by the Federal Government, the median earnings of women working full-time and year-round in the U.S. in 2017, was 80.5 percent of men’s median earnings. This gendered wage gap equals a $799 billion difference annually.
Similarly, per a 2017 study by the Institute of Women’s Policy Research, the gender pay gap may even be more significant than we believe. Analyzing a 15-year period, rather than year-to-year comparisons, the researchers found women workers’ earnings were 49 percent of men’s earnings. This figure would mean the actual wage gap is over 50 percent, not the 20 percent many purports it is today.
Men lie, women lie, but numbers don’t. So, while you may personally not believe there’s a difference between men and women, there’s clearly a difference between how much they’re respectively saving for retirement. These 10 reasons demonstrate the real reasons behind this country’s gender pension gap. But, now that you know these reasons, you can begin closing the gender pension gap in your own company.