Saving for retirement is a challenge for Americans who earn less or live longer.
And that, experts say, is why saving for retirement is especially difficult for women.
Women tend to earn less than men. They tend to live longer. Women spend more time caring for children and elderly parents and are more likely to sacrifice careers to do so.
Single women face a particular difficulty saving for retirement. A “grey divorce” can destroy a woman’s fortune.
Several recent reports highlight the uphill battle women face with retirement savings.
A survey of more than 5,000 Americans by Goldman Sachs, released this spring, found that 40% of retired women have $100,000 or less in savings, compared to 33% of retired men.
The survey found that 46% of retired women were living on half or less of their career earnings.
And 36% of retired women said they had taken time off work to care for a family member, compared to 13% of retired men.
A recent report from the Transamerica Center for Retirement Studies found that women have less than half the retirement savings of men, on average — $44,000 versus $91,000.
And a report from the Social Security Administration found that the average monthly benefit check in December 2022 was $1,638 for a retired woman, $2,020 for a retired man.
Saving money for retirement is especially difficult for single women
For single women, the retirement math gets worse.
Single women ages 55 to 64 had an average of $88,600 in retirement savings in 2022, while single men had $136,685, according to the Center for Retirement Research at Boston College. Married couples had $423,802.
A woman who divorces at age 50 or older can expect her standard of living to drop by 45%, according to a study from Bowling Green State University. A man’s standard of living drops by only 21% after a gray divorce.
Taken together, experts say, demographic and economic factors can jeopardize a woman’s financial security in retirement.
“Women are disproportionately bearing the burdens and financial realities of caregiving,” said Ramsey Alwin, CEO of the National Council on Aging. “You add to that longer lives and a Social Security system that wasn’t really designed for women.”
The retirement planning industry assumes you should start saving in your 20s and keep saving, off and on, into your 60s.
Many women cannot do this. They leave the workforce to raise children or support aging parents, often leaving the man free to build up his retirement savings.
For millions of women, “there are more ebbs and flows in being able to plan for retirement,” said Chris Ceder, a senior retirement strategist at Goldman Sachs Asset Management.
“My male colleagues probably have double the daily allowance”
Kathy O’Conner, 69, ran a successful consulting business in the 1980s and 1990s, leading corporate training sessions. She also spent more than a decade in human resources at Coors, earning a modest pension.
But gender inequalities bothered him at every turn.
“My male colleagues probably got double the daily fee I got for consulting,” she said.
After a divorce, O’Conner struggled to raise a daughter as a single parent. Around 2010, a health crisis forced him into bankruptcy.
“When you’re single, and something like this happens, it changes everything a lot,” she said.
Today, O’Conner struggles to cover her $1,700 monthly housing tab in suburban Denver. She lives on social security and a small pension. She has been looking for a job for over a year.
“Last November, I had to make a decision between having a car and a nice apartment to live in,” she said. “I chose the apartment.”
Fortunately, women can take steps now to protect themselves from insolvency in retirement. Here are some expert tips:
Save aggressively when you’re young
Women should save as much as they can for retirement in the early years, Ceder said, to prepare for the possibility of leaving the workforce later.
A four-year gap in employment in the 30s, he said, reduces lifetime retirement savings by 18%, on average.
It’s much easier to replace those lost savings before you leave the workforce, Ceder said, because the savings will accrue compound interest over a much longer period.
Load into annuities
In the world of pensions, an annuity is an income stream that provides regular payments, generally until death. A workplace pension is an annual pension. So does Social Security.
Women would do well to load up on annuities, retirement experts say, as a hedge against outliving their savings.
Rochelle Niccolls, 41, jumped at the chance to work in academia, where pensions are common. She is an administrator at the University of California, Berkeley.
“It was always a priority for me to have security,” said Niccolls, who lives in Santa Cruz, California.
The pension will come in handy. Niccolls saved aggressively for retirement in her 20s and 30s. That changed with her recent divorce.
“Living on my own, on one income, I’ve stopped saving for retirement,” she said.
Now, Niccolls is working with a financial planner to come up with a new retirement plan.
Pay off your mortgage before you retire
For a retired woman, a monthly mortgage payment can be a crippling debt.
If you can pay off your mortgage before retirement, experts say, it becomes much easier to survive on Social Security and retirement savings.
A mortgage-free home is a powerful retirement asset, said Michelle Crumm, a certified financial planner in Ann Arbor, Michigan. Its sale could help fund long-term care costs, a tab that could easily reach six figures.
Plan to work well into your 60s
The average American woman lives several years longer than the average man. And life expectancy increases with age: a 70-year-old woman can expect to live to 87.
For longevity reasons alone, women should plan to retire later, rather than earlier, experts say. A later retirement can also help women make up for missed employment while raising a child or caring for the elderly.
“Women pay more for all these other things you need in old age,” including health care and long-term care, because they live longer, said Cindy Hounsell, founder of the Women’s Institute for a Secure Retirement. “As a solution, women should work longer.”
More:What if every worker in America were automatically enrolled in retirement savings?
Postponement of Social Security benefits until 70
You can claim Social Security at age 62, but your monthly check increases with each year you wait to file for the benefit, until age 70.
Women should put it off as long as they can, experts say, especially if longevity is a family trait.
“There’s a lot of value in delaying the claim as long as you can, if you can,” Alwin said.