The Truth about Female Retirement

I am writing a follow-up post to the blog Megan Golles authored concerning poverty in older adults. Currently, the presidential debates have focused on Medicare and Social Security as hot topics for boomers heading into retirement who want to make sure they settle down with enough. Likewise, my last post touched on healthcare savings for seniors under the Affordable Care Act. Today the country is increasingly concerned over retirement security– and rightfully so. More specifically, however, is the financial instability associated with female retirement and the growing number of women who face older adulthood without sufficient savings. Older women are at greater risk for poverty than elderly men and, at age 80, the female poverty rate is nearly double that of men.

The Government Accountability Office issued a report this summer describing some of the challenges faced by women living into their retirement years. A lack of secure retirement funds can be attributed to a number of different root causes:

1. Lifespan. Women live, on average, three years longer than men, a trend that has been seen since the early 1900’s and is projected through the next four decades. According to the Women’s Institute for Secure Retirement (WISER), at age 85 women outnumber men two to one. One-third of women who reach the age of 65 can expect to live until the age of 90. That gives women more years in retirement, often without a spouse.
2. Caregiving responsibilities. Women are more likely than men to interrupt their careers for family caregiving duties relating to children and aging parents. While the number of male caregivers is growing, women still make up the large majority of family caregivers as noted by Joe Ferguson in his 2011 Bridge post. As a result, women tend to work fewer years in the workforce and leave the workforce early or for extended periods of time.
3. Employment Patterns. Women are more likely to fill a higher number of part-time positions. This puts them at a disadvantage when considering employer-sponsored retirement programs, which many don’t qualify for based on their part-time status. Interestingly, women’s participation in company retirement plans has actually improved over the last decade, according to the GOA report, and women are more likely to work for a company that offers a retirement plan. Nonetheless, a little less than half of today’s women participate in a retirement plan.
4. Financial illiteracy. Studies show that women experience a higher rate of financial illiteracy than men. Only four in ten women at age 55 felt as though they had made good retirement plan decisions and half of women express needing assistance in managing some of their finances. Despite this, over half have never consulted a financial advisor regarding their retirement planning.

What we can gather from the information above is that women have, on average, lower annual earnings and lifetime earnings compared to men. A recent study published in July from the Insured Retirement Institute noted that female retirement shortfalls are between 25 and 30 percent less. To understand the extent to which these contributing factors hurt female earnings, the GAO reports that a woman with a college degree would earn half a million dollars less in wages than her male counterpart. This certainly doesn’t bode well for retirement savings.

Many people are familiar with the historic three-legged stool of retirement, which includes personal savings, one’s company retirement plan and social security. Unfortunately, for today’s older adults and women in particular, retirement stools are missing some legs. And the bottom line for women, as illustrated above, amounts to less overall retirement savings. As a result, women depend to a large extent on the income provided by social security, especially women over 80. In 2010, 16 percent of retired women depended on social security as their sole means of income. Some portions of Social Security benefits can begin as early as age 62 or as late as age 70. (To know when you can receive full retirement benefits, and to understand the breakdown of reduced benefits, the Social Security administration has made available this fact sheet.)

I’m certainly not a financial advisor and I’m not about to give any retirement advice in this post. But, the Department of Labor, along with some other websites dedicated to retirement literacy, have made available a number of resources to help women (and men) be successful in their later years. Please follow the links below or pass them along to your clients for more guidance and information regarding retirement.

  • Financial calculators and worksheets that will be helpful in determining how much to save for retirement: www.choosetosave.org/asec (click on the ‘Ballpark Estimate’ tab at the top left of the homepage) and  WISERWoman
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