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Women and the gender retirement income gap

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Al Waller

Despite progress made in recent decades, in terms of educational advancement and career opportunities, the retirement outlook of women still lags significantly behind men. Fewer than one in five women in the workforce state they are “very confident” that they’ll be able to fully retire with a comfortable lifestyle, according to findings from a new study from nonprofit Transamerica Center for Retirement Studies®.

I’m your host Al Waller. On this episode of ClearPath – Your Roadmap to Health and WealthSM, joining me is Catherine Collinson, head of Transamerica Institute® and its Transamerica Center for Retirement Studies®.

Today we’re going to discuss why women are at greater risk of not achieving a comparable security as their male counterparts– and what can be done about it?

Catherine, you and your team have been conducting research on women and retirement for nearly two decades. So, what can you tell us about these issues?

Catherine Collinson

Al, there is so much to talk about. Even having done this for 20 years, it still astonishes me that there continues to be a lack of widespread awareness about these issues. My team and I are on the eve of releasing a new report that examines retirement disparities between women and men. As you referenced in your opening, fewer than one in five women workers, only 18 percent, are “very confident” about their retirement prospects, compared with 28 percent of men.

Al Waller

Well, I suspect that things have improved over the years as more women have entered the work force and become more career-driven for that matter. But that said, these findings are still kind of disturbing.

Your survey findings are based on women’s sentiment, so, to what extent do they depict reality?

Catherine Collinson

Unfortunately, this has a foundation in reality. There are contributing factors that undermine women’s ability to achieve a secure retirement, even now in the 21st century. These factors range from the gender pay gap to taking time out of the workforce for parenting and caregiving. These factors also translate to lower lifetime earnings, less ability to save, fewer employer benefits, and even lower social security benefits at retirement age. Moreover, statistically speaking, women live longer than men, which means we need to be saving for even longer retirements.

So Al, if you’re up for it, I’d like to break it down factor by factor and talk about the impacts.

Al Waller

Absolutely! Thanks for suggesting because I think it would be helpful for our listeners to gain a deeper perspective on each of these issues.

Catherine Collinson

Let’s start with the gender pay gap. According to the Bureau of Labor Statistics data, in 2020, women’s annual earnings were 82 cents on the dollar earned by men. Now we must pause for applause because this is a vast improvement since 1973, when women only made 57 cents for every dollar earned by men. The good news is we have made progress. However, our work is far from done.

Now, let me talk about the long-term impacts of the gender pay gap and how it influences retirement savings. At risk of stating the obvious, a lower income translates to lesser ability to save. However, there are some nuances that may be less obvious for many.

For example, a woman worker who is earning less than a man is saving in her employer’s 401(k) or similar plan and that plan has an employer matching contribution. Well, she may be saving the same percentage in the plan as the man. However, because she earns less, she’s getting a lower matching contribution.

As we look at it… Saving less, less access to that matching contribution, and looking at savings growth over time, a career that can last 20 – 30 or more years can lead to a big difference in the size of nest eggs when someone reaches retirement age.

Al Waller

Well, I can certainly attest to that because back in my consulting days as an HR business professional, I observed a significant number of female employees leaving their employment to be either stay-at-home-moms or caregivers or in some cases, both.

And now, amid the pandemic, we have what I’m hearing is a women’s mass exodus from the workforce. According to the National Women’s Law Center, at one point their data indicated a staggering 2.3 million women had left the workforce.

How does this impact women’s future retirement? I mean this can’t be great news, right?

Catherine Collinson

Great question, Al – I’m really worried about it. For many women, this could prove to be a major setback in their retirement security. Now, while women are leaving the workforce for very personal and important reasons, I’m concerned that they may not be fully aware of the long-term implications. When a woman gives up her employment, she’s not only giving up her income, she’s giving up employer benefits, and she’s accruing less towards her benefits. As well, when she’s ready to go back to work, she may find it extremely difficult to find a job after an extended absence from the workforce and even more difficult to find a job at the same level of pay.

Al Waller

Exactly. And to your last point regarding reclaiming previous compensation earnings, I can attest firsthand that resuming one’s career trajectory for women to be equally challenging.

So, it would appear working part-time – keeping some skin in the game if you will – may actually be a better option for women who are seeking work-life balance.

Catherine Collinson

Indeed it is. By working part-time, a woman can earn income and as you said she’s staying in the game, which means she’s keeping her skills up to date and staying current in the marketplace. If our parents taught us anything when we were young, it’s a lot easier to find a job if you already have a job. If a woman is planning to go this route, it’s important to research employer benefits.

Employer benefits such as health and welfare and retirement benefits offer an opportunity to save for retirement as well as help protect against unexpected health care expenses or other expenses. The reality is, most employers offer these benefits but exclude eligibility to their part-time workers. So, if you’re thinking about going this route, do your homework. You want to find an employer so that you’re not just going to have a paycheck, you want to have access to these important benefits.

On that note, I have an example I can share with you. A friend, who was very successful in doing this, had an important job with crazy hours that required hard work. Well, her father got sick and his health was declining. She was worried because she loved her job but she loved her father too.

She was in good standing with her employer who was open minded and progressive, and she was able to work out an agreement where she could switch to part time. However, when she did, she learned what were the minimum number of hours required to still receive benefits so she could dial back and still have access to those benefits.

Not all employers are this progressive in their thinking. So, if you are considering doing this and if your employer does not have a set policy, do your homework. See if others have done it and ask them for their secrets of success…because what you don’t want to do is accidentally tip your hand and create an impression with your employer that you don’t take your job as seriously as you do.

Al Waller

Good point to proceed with caution because I can attest that a lot of employers, not all, but a lot of employers are quite frankly reluctant to thinking outside of the box in negotiating terms of employment when it could help valuable people stay or enter the company.

Moving on, I get that lower pay and time out of the workforce can inhibit a women’s lifetime savings as well as retirement benefits.

My question for you now is, how much.

Catherine Collinson

The difference is staggering. In looking at our own TCRS survey data of Baby Boomer workers – the generation nearing and entering retirement – women have saved an estimated median of $134,000 in all household retirement accounts, which is still less than half of what men have saved at $282,000.

When we think about it, $134,000 is not a lot when thinking about a retirement that could last 20 or 30 or more years – and, for that matter, neither is the $282,000 reported by men. It is very concerning women have saved less than half than men but both women and men have not saved enough.

Al Waller

In this day and age, you’ve got that right, especially when inflation re-enters into the picture.

Now, many retired people live on Social Security. How do benefits compare by say…women versus men?

Catherine Collinson

Again, there’s a major disparity. According to the Social Security Administration’s 2021 Fast Facts and Figures publication, the monthly benefit of retired women workers was $1,378 per month, compared with $1,714 per month among retired men workers.

We’ve talked about the gender pay gap during working years. When we look at the gender pay gap in terms of Social Security benefits, retired women are earning about 80 cents per dollar of retired men. In this day and age, $1,378/month just doesn’t go that far. In certain parts of the country, it won’t even cover the cost of renting a 1-bedroom apartment.

Al Waller

Well Catherine, these are some very serious and sobering statistics.

And I’ve got to say, and I’m almost afraid to ask, are there any other issues our listeners need to be aware of?

Catherine Collinson

Yes, I’ll share one last issue. Statistically, women live longer than men. According to the CDC’s National Center for Health Statistics, the life expectancy of a 65-year old woman today is 20.1 additional years, compared with only 17.4 additional years for a 65-year old man. That means a 65-year old woman today is likely to live almost three years longer than her male counterpart. So because women are likely to live longer, we need to plan for more time in the workforce and/or longer retirements.

Al Waller

Exactly Catherine, and in this conversation, you’ve described pervasive societal and structural issues that are seriously impeding women’s ability to achieve a secure retirement. So then, what steps can we take to help bridge these inequities?

Catherine Collinson

The first step in solving a problem is recognizing there is a problem and understanding the dimensions of that problem. The good news is progress has been made in recent decades, but clearly, there is much more work to be done.

Public policy plays a vital role in addressing structural issues, including continued efforts to bridge the gender pay gap, increasing access to employer benefits to part-time workers, and recognizing (and monetizing) the value of parenting and caregiving. It’s especially important that policy makers address Social Security’s estimated funding shortfalls. This is particularly important because as we spoke of, women not only receive fewer social security benefits, they are actually more likely to solely rely on them as their primary source of income in retirement. So, addressing social security is an “everyone” issue but it is also specifically a women’s issue.

Al Waller

Well, given the current and I might add widespread reports of labor shortages, this just may be a very good time for women seeking to get back in the workforce. And I think it’s important to note that amid the pandemic, an increasing number of employers have offered remote working and flexible work arrangements. So, I’m thinking and hoping that this may just bode well for working mothers and caregivers.

Now Catherine, what are some additional steps that women can take to improve their retirement outlook?

Catherine Collinson

Our survey findings yielded some results I find encouraging. You can look at “the glass” as half empty or half full…I’m going to look at it as half full. The survey found there are many action steps both women and men can take they aren’t yet taking that can improve their retirement prospects and are within reach, things that just about everyone can do. Here are my tips as good starting points:

  • Assess your current financial situation and create a budget. Develop a retirement strategy and write it down. This may sound really basic, but most people are not doing this yet. If you think about it, it is impossible to reach a destination if you don’t have a roadmap. And that’s what your financial plan and strategy gives you…a roadmap.
  • Consider health, welfare, and retirement benefits when looking at a new job and if you are considering changing your status to working part time. These are important benefits that are part of your overall compensation package. They bring insurance protections and the ability to save for retirement. If your employer offers a retirement plan with a matching contribution, take advantage of it.
  • If faced with parenting or caregiving responsibilities, carefully consider any changes to your employment situation – and consider working part-time, which can help you stay in the game, as an option, versus giving up employment altogether.
  • Knowledge is power. Become educated and savvy about retirement investing, strategies for drawing down savings in retirement/retirement income, and when to start claiming Social Security. These decisions can profoundly influence your financial situation when you retire.
  • Build emergency savings and create a backup plan in the event of life’s unforeseen circumstances. These could range from everything from separation or divorce or loss of a spouse/partner to health issues and being unable to work until your planned retirement.

These tips can help you and improve your overall financial situation. They also can give you comfort and some empowerment that you are taking charge. You can address issues as they come up.

The last idea that I want to leave you with is that we have to start talking about this. I invite you to start a conversation about retirement security and specifically about the vulnerabilities among women. In my own experience as a woman, when we bring issues out in the open, explore opportunities and discuss them in earnest, we can make things happen. So, let’s start this conversation.

Al Waller

Well Catherine, these are some really important suggestions which I’m hopeful will enable women to save and better plan for a financially secure retirement.

To your point, after doing research and when items are written down, things get done. As well, we need to have open communication and have this conversation. Don’t avoid the conversation because that time is coming sooner than you think.

Now where can our listeners go to learn more?

Catherine Collinson

First, I want to give a huge shout out to WISER, Women’s Institute for a Secure Retirement. Later this month, WISER will be celebrating its 25th anniversary and is hosting a free, virtual symposium on October 29. WISER’s website is packed with tools and resources for women, including a monthly budget worksheet. You can register for the symposium and check out their resources at www.wiserwomen.org.

Regarding our own TCRS retirement research, you can also find Transamerica Center for Retirement Studies 21st Annual Retirement Survey of Workers on our website at transamericainstitute.org. Follow us on Twitter at @TI_insights and @TCRStudies to stay up to date with our latest publications, including our forthcoming report and fact sheet on women and retirement.

Al Waller

Good stuff as always Catherine!

And thanks again for listening to ClearPath—Your Roadmap to Health & Wealth.

I’m your host Al Waller. Please join us next time when we delve into critical insights regarding employer and health care benefits enrollment.

ClearPath: Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s Podcast Central and mobile app, wherever you get your podcasts, and at transamericainstitute.org/podcasts.

This podcast is produced by Transamerica Institute, with assistance from WYPR.

Al Waller is a long-time Baltimore native and employment expert with a 30-year career in leading and advising locally and globally based corporations on matters including: Talent Acquisition and Retention, Employee Relations, Training and Development.
Catherine Collinson is the founding president and CEO of nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, and she is a champion for Americans who are at risk of not achieving a financially secure retirement. With two decades of retirement industry-related experience, Catherine is a nationally recognized voice on workforce, aging, and retirement trends. She was named a 2018 Influencer in Aging by PBS’ Next Avenue. In 2016, she was honored with a Hero Award from Women’s Institute for a Secure Retirement (WISER) for her tireless efforts in helping improve retirement security among women.