Financial Resource Center

Retirement Planning

The Big Gap in Retirement Funds Between Men and Women

by Laura Varela / August 16th, 2019

Many of us look forward to having a happy, relaxing retirement. But if retirement planning is not a priority for you now, you may be putting your “Golden Years” at risk, especially if you’re a woman.

On average, men’s retirement funds are out-pacing women’s. What’s the reason for this disparity? Women must deal with certain factors that men, generally, do not:

1. Women are paid 80¢ for every $1 a man gets, so they end up with 2/3 less in pensions and Social Security than men do when they retire.

2. They spend about 7 years out of the workforce taking care of children or elderly relatives.

3. They live 6-8 years longer than men, so their retirement funds need to last longer.

According to a study by Transamerica Center for Retirement Studies, about 45% of women expect to rely on their savings and investments like 401(k) and IRAs accounts, and 30% expect to survive on Social Security benefits alone. However, most are worried that Social Security won’t be around for them when they retire. Paying off debt is the top priority for 68% and only 51% make retirement saving one of their priorities. Not surprisingly, more than half of the women surveyed in this study said they expect they’ll have to work after age 65.

Since many women take time off to care for children and family members, they have fewer total working years than men. Fewer years with a single employer and lower pay may result in a lower average pension for women workers. Social Security is calculated based on a person’s highest 35 years of earning, so if a person doesn’t have 35 years in the workforce, the Social Security Administration adds zero-earning years to their record to equal 35 years. That lowers the monthly earnings average for women with less than 35 years.

Many married women think they can rely on their husband’s retirement savings. However, those savings could be depleted by healthcare costs for the spouse who dies first. Having your own retirement account will be a back-up should you need it.

So, What’s a Good Plan of Action?

If you haven’t already started putting money into a retirement account, like a 401(k) or IRA, do so as soon as possible. The earlier you start, the more compound interest you’ll earn, and the better off you’ll be. Also, look into other investment vehicles, like mutual funds, stocks, and bonds, to help you reach your retirement goals. If you don’t know which investment vehicles are best for you, talk to a financial advisor to help you find the best fit.

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