The data is sobering about women’s retirement preparedness, but being pre-emptive can help stave off a shortfall.
Among researchers, there’s an active debate about whether there’s a retirement crisis in the United States. Despite sobering statistics about average 401(k) plan balances, researchers point to Social Security’s high level of income replacement for lower-income workers as evidence that undersaved workers won’t run out of money during retirement.
Yet one aspect of retirement preparedness is a settled matter: Women are in worse shape than men on nearly every important metric.
The reasons are manifold, but a few factors loom large. Women have lower lifetime earnings than their male counterparts, due to both wage inequality and the fact that women are more likely to stop working or maintain a reduced schedule to devote time to caregiving for children, elderly parents, or both. Lower lifetime earnings translate into fewer opportunities to fund retirement accounts. In addition, women must stretch those smaller average balances over a longer time frame in retirement, as 65-year-old women outlive their male counterparts by two years, on average. That convergence of lower retirement balances and a longer retirement period helps explain why women are much more likely than men to be poor in retirement and to rely exclusively on Social Security for their living expenses. And thanks to those lower lifetime earnings, women’s Social Security checks are also smaller than their male counterparts’.
There’s no easy fix for the problem, but women should consider the following steps to help stave off a shortfall.