Closing the Gap in Women’s Retirement Savings

Jenius Bank Team7/11/2023 • Updated 6/27/2024

Thoughtful woman looking towards a bubble with her relaxing.

Planning ahead may help you achieve the retirement of your dreams.Roughly half of working women believe their retirement savings won’t be enough to cover their cost of living when they leave the workforce.¹ Many factors contribute to this discrepancy, such as the gender wage gap and reduced time in the workforce, just to name two.If you’re feeling behind in the retirement savings game, there are strategies you could use to help set yourself up for the secure and comfortable retirement you deserve. Let’s look at some of the challenges facing women when it comes to building their retirement savings and a few actionable tips you could use to help bridge the gap between where you are and where you want to be.This information is not tax or investment advice. You should consult with a tax advisor and/or a qualified investment professional for advice specific to your particular circumstances.

Key Takeaways

Women lag behind men in retirement savings for multiple reasons, including the gender pay gap, retiring earlier than planned, and often spending less time in the workforce.
Women’s retirement needs are different than men’s, due in part to their longer life expectancy.
The earlier you begin planning for retirement, the more likely you are to have enough savings on hand.

Every Woman Needs a Retirement Plan

According to the U.S. Census Bureau, 50% of women nearing retirement age have no retirement savings at all, and those who do fall behind men in total savings.² That lack of savings may be made up by a spouse’s retirement savings, but trying to support two people off one retirement income could be challenging. As prices and inflation rise, necessities cost more. By the time you reach retirement age, you may need more money saved up just to maintain the lifestyle you’ve become accustomed to while working. Without a retirement plan in place, covering your expenses may be significantly more difficult and, in some cases, could leave you working well into your retirement years.

Women Face an Uphill Battle

It's easier to understand why some women feel behind when you look at the past.“Throughout history, women have been discriminated against — from credit discrimination to wage and profession gaps,” says Tracey Dunlap, Executive Vice President and Head of Customer Experience at Jenius Bank. And history’s trends are continuing. According to Tracey, women still make only 82 cents for every dollar that a man earns.³ But the inequality doesn’t end there. Women still bear a majority of caregiving responsibilities for children or aging family members. For some women, this may result in less time spent in the workforce, which in turn could lead to lower retirement savings and lower Social Security payments at retirement.⁴This uphill battle means it is incredibly important for women to start saving for retirement as soon as possible. The sooner you do, the easier it could be to save more and build your wealth over time.

Factors That Impact Retirement Planning for Women

Though retirement may look different for women, the steps for planning retirement are fairly standard for everyone. That said, here are some factors to keep in mind as you approach your retirement planning.

Women Tend to Live Longer

Statistically speaking, women live longer than men, which means you may need to plan for more retirement years.⁵ Additionally, women may be more likely to experience health problems and age-related disabilities due to their longer lifespan, so planning for long-term care and medical care is essential.⁶Of course, there are some government programs to help older individuals afford their healthcare. But most programs have limitations. Setting aside funds for future medical expenses may help you access the quality of care you want and to live a comfortable and active retirement life.

Your Marital Status Matters

Marital status is important because it influences how much you may need when you retire. For instance, couples generally need a larger financial cushion – for a larger living space, double the healthcare, and other similar factors – than someone who is planning for retirement alone. That said, married couples may also have two incomes and retirement plans, such as 401(k)s or IRAs, to contribute to, which could make it easier to save more. On the other hand, a single woman may need to save a larger percentage of her income to live a comparable retirement lifestyle to a married couple.⁷ The full burden of building those savings is on her, which may make it harder to save enough. If this is the case, you may need to set more aside and the sooner you start, the more time you potentially have to grow your savings .

Social Security Benefits Vary

Social Security is a government program that provides income to Americans who are retired or unable to work due to a qualifying disability. While you’re eligible to start receiving retirement distributions at the age of 62, waiting until you’re 70 or older could result in a higher monthly payment.⁸Social Security benefits may be affected by current marital status. In addition to your own Social Security benefits, being married, widowed, or even divorced could entitle you to part of your current or former spouse’s benefits as well.⁹The Social Security Administration has additional benefit information for spouses on various scenarios that could impact the benefit amount you’re entitled to. You may want to factor Social Security payments into your estimated retirement income to see where you stand in progressing toward your goals. Remember, these payments are likely not enough to cover your living expenses on their own, but they may help offset some expenses and give you additional retirement income.

How to Close the Retirement Savings Gap

Let’s look at some possible tactics for closing the retirement savings gap.

1. Save More and Make Savings Routine

For women to keep up with their male counterparts in retirement, they may have to save a higher percentage of their income each month. And if that income is less, well, the percentage may need to be even higher. Granted, this is not as easy as it sounds. But the sooner you come to grips with your retirement savings challenges, the more time you have for action!What are ways to save more? One strategy is to make long-term savings routine…have the money automatically pulled from your paycheck or checking account each pay period or month. Making a habit of saving could help to keep you on track.And, if you have a 401(k), for example, maximize contributions to your retirement account. By doing so, you may also be able to take advantage of certain tax benefits, depending on the account type. If you don’t have a 401(k), maxing out your IRA is another potential avenue.For 2024, the government allows you to contribute up to $23,000 to your 401(k) and up to $7,000 to an IRA.¹⁰ If your employer offers matched retirement fund contributions to your 401(k), make sure you’re contributing at least enough to qualify for the full match… don’t leave that potential savings on the table!Additionally, if you’re over 50, the government also allows catch-up contributions for certain retirement accounts—an additional $7,500 to your 401(k) and another $1,000 to your traditional or Roth IRA.And if you want to save even more? Consider a high-yield savings account. Doing so helps keep your funds accessible, while potentially giving you a better rate of return than most savings accounts at traditional banks.

2. Diversify Your Investments

Diversifying your savings portfolio may also help increase your total net worth, potentially providing more available funds when you retire. Diversification could happen on several levels: from allocating funds within your retirement accounts (company size, industry, security type, etc.) to placing investments outside of financial markets, in real estate for example.It’s important to consult with a financial advisor on investments to create a portfolio that suits your needs and risk tolerance. What is risk tolerance? It refers to the amount of risk you’re willing to accept given the volatility of investments. For example, someone with a low risk tolerance may choose to keep their money savings vehicles like certificates of deposit or government bonds… taking the “slow and steady wins the race” mentality. Someone with a higher risk tolerance may put more of their funds into stocks hoping to get in early on “the next big thing”. In the spirit of balance, spreading your money across different investment types may allow you to take advantage of some bigger wins while safeguarding a portion of funds for the long term. Just remember - all investments carry some risk and returns aren’t guaranteed.

3. Talk to a Pro

Again, if you find yourself feeling unsure about the right move for you, consider talking to a retirement savings professional. Someone with the right qualifications could help analyze your personal financial situation and goals to create a plan based on how much money you may need in retirement.

4. Review Your Retirement Plan Regularly

Whether you’re a single head of household, primary wage earner, or partner in earnings, it’s important to remain an active participant in the retirement planning process throughout your working life. Revisit your goals and progress on a regular basis and make adjustments you may need given changes in your life stage, the market, or your personal preferences.

Final Thoughts

In a relatively short time, women have made tremendous strides in the workforce, gaining the kind of financial independence and earning power their grandmothers dreamed of. As women work to close the gap on earnings in their working lives, we can’t neglect the need to also close the gap in saving for the years that come after. By taking the time to review your retirement plans and actively manage these savings, you could be on the road to achieving financial wellness that lasts for the rest of your life.

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