Older women receive just 83% of the retirement income older men receive, with new research finding that caregiving, especially spousal caregiving, has a more detrimental economic impact on women, while divorce also makes retirement more difficult.
More specifically, the median household income for women aged 65 and older in 2016 was $47,244 or 83% of median household income for men, which as at $57,144.
The findings are detailed in a new study from the National Institute on Retirement Security (NIRS), “Still Shortchanged: An Update on Women’s Retirement Preparedness,” available here.
The study says that while most Americans are struggling to save for retirement, women face even higher hurdles, largely stemming from the gender pay gap that eventually becomes a retirement wealth gap. It details the inequalities in retirement savings between men and women, examines the sources of income for men and women in retirement and the ways in which they differ, and considers specific factors that are more likely to negatively impact women, such as divorce and caregiving responsibilities.
Fixing the problem
“Even before the COVID-19 financial crisis, the nation was facing a retirement saving crisis, with women already at a significant disadvantage,” said report co-author Tyler Bond. “As we are on the brink of an economic depression, there is an urgent need to fix the broken retirement infrastructure, especially for women.”
For example, Bond says changes to Social Security would make a significant difference in retirement outcomes for women—expanding benefits, adjusting spousal benefits and providing caregiving credits. Another solution would be for states to adopt stronger family leave policies to make it less punitive for women to take time out of the labor force to provide caregiving.
“Also, creating a universal savings vehicle for all workers would give more women a vehicle to save for their retirement, even if their employer does not offer a plan,” Bond said.
Report co-author Joelle Saad-Lessler says it is important to remember that women typically live longer than men, and have significantly higher retirement costs over their lifetime because they have to pay for more years of retirement and spend more years being single in retirement.
“Essentially, older women are paying for more years of retirement with less money. We also find that married women are better off in terms of retirement savings as compared to single women,” Saad-Lessler says. “But marriage presents its own retirement challenges given that the structure of Social Security works against dual-earner couples.”
Some 60% of caregivers are women—caring for children, aging parents who may become dependents, or an ailing spouse, report co-author Christian Weller adds.
“Over time, caregiving can substantially erode a woman’s earnings and savings, further weakening their retirement security,” Weller says. “And even when men are caregivers, they can better handle the risks because they typically start from a wealthier position than women.”
More key findings
- Women earn less than men over the course of their career. Men with savings in a defined contribution (DC) plan far surpass the earnings trajectory of women with savings in a DC plan, and earn significantly more than women without DC savings.
- Women experience a steep decline in income past age 80. Women age 80 and older are much more likely to be widows and widowhood presents challenges on both the income and cost side of retirement.
- There are stark differences in the sources of income for women in the top and bottom income quintiles. Women with less than $20,000 of income in retirement are much more dependent on Social Security income, whereas women with income above $80,000 receive much more from earnings and property income.
- Divorce presents a complex set of issues relating to retirement preparedness. The timing of divorce seems to matter, as does the division of assets following a divorce.
The report’s authors will be hosting a complimentary webinar on Tuesday, May 12, at 3 p.m. EDT to review the findings and respond to questions. Registration is available at this link.