Baird’s Retirement Guide for Women | Page 6

How We Got Here

When it comes to retirement planning , it ’ s important to recognize that , compared to men , women need to do more with less . There are lots of reasons for this discrepancy – some under our control , some not – but the takeaway is clear : To achieve the retirement you want , it ’ s critical you take an active role – and the sooner the better .
Women Tend To Have Less Wealth at Retirement ... It ’ s no secret that , even when accounting for potentially mitigating factors , women earn less than men – barely 82 cents on the dollar . 4 While an 18-cent gap might not sound like much , it can have profound , far-reaching consequences on retirement savings over the course of a career .
As we ’ ll explore shortly , some of the main sources of funds for retirement include employer retirement plans , Social Security and personal savings and investments . This 18 % disparity has a significant impact on all of them :
• The discrepancy in take-home pay results in fewer funds available to be moved into savings or invested . That difference is magnified over time as wealth accrues and is reinvested year after year .
• It also results in fewer resources available to be put into an employer retirement plan , often the biggest source of retirement funding .
• Because Social Security is based on the wages earned over a career , women earning less than men can expect a commensurate drop in Social Security income .
So for most women , three of the main sources of retirement funding are underfunded , compared to their male counterparts . But it doesn ’ t end there :
• While a college degree can create new opportunities for career growth and increased wealth , an education alone isn ’ t enough to narrow the gender gap : Over the course of a lifetime , a woman with a bachelor ’ s degree earns on average just 60 % what a male college graduate earns . 5
• The responsibilities of caregiving still tend to fall predominantly on women – and not just for raising kids . Adult daughters are nearly twice as likely as adult sons to be the primary long-term caregiver of parents . 5 Not only do they incur additional expenses associated with care , but that time spent out of the workforce is time not contributing toward retirement .
• According to U . S . Census data , women are four times more likely to be single parents than men , meaning more of their income is spent caring for children . 6
As a result of gender discrepancies like these , women ’ s average retirement savings are only 59 % of those of men upon entering retirement . 7 In the long term , we have to do a better job educating women about investing and the importance of prioritizing retirement . In the meantime , we need to focus on strategies women can take now to build up their retirement savings and knowhow .
... Despite Having Greater Retirement Expenses The gender gap can be especially acute in retirement , when women can expect to have a greater need for resources – and for a longer period of time . Consider :
• On average , women live nearly 5½ years longer than men , though as we ’ ll discuss later , that statistic undercounts the true longevity gap . 8 Importantly , because they are more likely to be the surviving partner , older women frequently have to assume responsibility for their spouse ’ s medical and long-term care expenses .
• In addition to living longer , women are more likely to be single longer . According to a 2020 Pew Research study , while younger men are more likely to be single than younger women , that trend begins to reverse by age 50 . At age 65 and older , nearly half of all women are single , compared to just 21 % of men . 9
• Women are more likely to need expensive long-term care . Research shows that women are twice as likely to be living with a disability and nearly twice as likely to develop Alzheimer ’ s disease . 10 , 11 Women are also more likely to be enrolled in hospice and account for 70 % of nursing home residents and 75 % of assisted living community residents . 12 Among those 75 or older , women are 60 % more likely than men to need help with activities of daily living like bathing or feeding themselves . 13
• Women are more likely to be caregivers . According to a recent report by the Family Caregiver Alliance , two-thirds of caregivers are women , who spend up to 50 % more time providing care than their male counterparts . 14
As much attention is placed on the income gap between men and women , there seems to be a general misunderstanding that men ’ s and women ’ s expenses in retirement are roughly equal . Recognizing that women can have much greater expenses in retirement should be top-of-mind for any woman – or couple – making decisions surrounding retirement .
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