Women and Their Retirement Future

Many women have concerns about their financial futures. From gender-specific complications, to underfunded savings, to sometimes self-inflicted financial downfalls, women generally do not receive as much monthly income as men.1

Let’s try to answer some of the “why” questions.

Why do women generally receive less in Social Security?
First, let’s look at Social Security. Social Security helps provide financial support in retirement to millions of recipients, and the formulas that govern how much people receive in benefits ensure that women and men who have identical work records earn identical amounts from Social Security.

Although Social Security calculations are meant to be “gender neutral,” there remains a wide disparity in actual benefit amounts, with women usually receiving the Social Security “short end of the stick.”2

In addition, on average, women today who reach age 65 tend to outlive men by over two years, which places extra pressure on their Social Security income and savings.

In 2016, more than 50 percent of all Social Security benefits were paid to women.3 Yet when you look at what the data shows about women’s benefits compared to men’s, you’ll discover a somewhat troubling fact: Typically, women’s Social Security payments are far smaller than men’s.4

More than half of all women receive less than $1,000 in monthly Social Security checks. In contrast, the typical man earns about $1,500 from Social Security.

The main drivers of the inequality in benefits between the sexes are5:

• Career length (due to childrearing, caregiving, and supporting spouse’s career)
• Career path (lower-paying jobs)
• Unequal pay (within the same industry)
• Unemployment (women have a higher rate than men)

Since women have been in the workforce for many years now, is the gap between what men and women receive in Social Security shrinking?
The gap doesn’t appear to be shrinking. I cannot say with certainty, but it appears that the biggest disparity today is the “gender income gap.”6

According to the U.S. Census Bureau in 2014, women who work full-time made just 79 cents for every dollar paid to men. This lower pay translates into lower Social Security benefits, and because women live longer, this has a much bigger impact on their financial security.

What should women be doing to make up that difference?
There are several ways women can mitigate the financial effects of lower Social Security income. One is to fund their own “nest egg.”

The second is to strategically decide when to take their Social Security benefits. Women should start saving and investing as soon as possible — the earlier you begin saving and investing, the more time your nest egg has the potential to grow.

If available, establish automatic deductions from your paycheck into an employer-provided retirement plan. If your employer provides a match, always set a goal to contribute at least as much as you need to capture the entire match.

If your employer doesn’t offer a retirement plan, additional savings options include Traditional and ROTH IRAs.

Most women are astute investors. Multiple studies reveal that women are known to plan ahead, earmark money for savings, and avoid costly, knee-jerk reactions to stock-market turbulence better than their male counterparts. An ability to follow rules, maintain a diversified portfolio, and stick with a plan are key to accumulating more dollars for retirement.

Female investors also appear to maintain more balanced portfolios than do men, which may potentially be beneficial during market volatility.

Eight to 10 percent of women hold all of their assets in stocks, versus 10-15 percent of men.

Are women more likely to attend a retirement seminar than men? Why?
I find that women are interested in attending seminars, but due to juggling multiple tasks (careers, families, and other commitments), there’s very little time remaining to attend. Seminars that encourage, empower, enlighten, and guide women through their decision making (including finances) are much more powerful than the basic topic of budgeting, saving, and investing.

For women who are close to retirement age, why would it benefit them to wait to receive their Social Security benefits?
When to claim Social Security benefits is vitally important! Delaying the start of benefits until full retirement age (FRA) is a strategy that may increase their monthly Social Security benefits for life.

A delay in taking Social Security benefits will raise monthly income benefits, and by continuing to work, the average wages on which your benefit is determined will also be higher. This helps offset a portion of the years when Social Security contributions may have been lower and/or zero.

By filing for Social Security when a woman is first eligible, she is setting herself up for a permanent reduction in Social Security benefits (by as much as 30 percent) for the remainder of her life.

More than 40 percent of women who elect to begin collecting Social Security retirement benefits are age 62. It’s important to take into consideration that the Social Security Administration reduces benefits for anyone who claims benefits before their FRA.

It would be one thing if women generally had other significant sources of income in retirement, but according to studies, women are five times as likely as men to live only on their Social Security income. This income shortage is exacerbated by taking the benefits early.7

When seeking out a financial adviser, perhaps a “female-friendly” adviser will provide better financial guidance for complex situations such as blended families, intergenerational issues, sudden wealth, sudden singlehood, Social Security, and other challenges that women often face.

The most common traits that women ask for when seeking an adviser are honest guidance, transparency, reliability, education, empathy, and great communication.

Women face significant financial obstacles on the road to retirement security, but by bringing their discipline and investment strengths to bear, they can potentially offset those challenges and set themselves up for a successful savings outcome and a satisfying retirement. BW

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CRC 2130513 6/18
1. Source: www.tiaa.org/public/pdf/income_gender.pdf
2. Source: www.tiaa.org/public/pdf/income_gender.pdf
3. Source: www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/fast_facts16.html
4. Source: www.actuary.org/content/women-and-social-security-1
5. Source: www.actuary.org/content/women-and-social-security-1
6. Source: www.tiaa.org/public/pdf/income_gender.pdf
7. Source: www.ssa.gov/news/press/factsheets/ss-customer/women-ret.pdf