Inside America's retirement gap: why women are on the back foot

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By Amanda Kavanagh

A 2024 report issued by Goldman Sachs reveals a gender retirement gap, as one in four women are set to retire with less than $50K.

And no, that's not $50K per annum, that's the total figure.

According to the report, which assumes a 4% withdrawal rate, this $50K in retirement savings provides just $2,000 of income per year.

Overall, women may have 24% less retirement savings due to income disparities, according to its calculations, which compares men and women with a Bachelor's degree, and personal savings over a 40-year period.

This means Social Security benefits will be essential to women retirees, but wait, there's another kicker. The report's authors also say, "according to the Social Security Administration, women on average receive 22% less in Social Security benefits driven in part by pay gaps and part-time work."

For the report, Goldman Sachs Asset Management examined responses from 5,261 survey participants across gender, age, and employment positions in 'Challenges Women Face Saving for Retirement', a supplement to its 2023 Retirement Survey & Insights report.

Looking at the why
There are a number of reasons explored in the report for this savings disparity.

The well-reported gender pay gap is one reason, as income differences compound over a lifetime, resulting in lower retirement savings for women.

Women are also more likely to take career breaks or shift to part-time work due to family care and household responsibilities, and the number of people in full-time care roles is also on the rise. The number of adult US carers increased by 20% to 47.9 million between 2015 and 2020, and 61% of those were women.

This results in lost income and paused pension contributions in the short-term, and impacts on career progression and long-term earning potential, both of which influence how much you can save for retirement.

Women also tend to retire earlier than planned, but are more likely to do so for forced reasons, for example, health, taking care of a family member, or job loss.

There's also the expectancy of a longer life. On average, women live longer so retirement savings need to cover a longer period of time.

Lastly, the aforementioned Social Security does not account for part-time work or career breaks, leaving many women on the back foot with lower benefits and overall pension income.

State of play
On the other end of the savings spectrum, when retired men and women were asked about their level of retirement savings, including all 401(k), traditional IRA, Roth IRA, 403(b), 401(a), and 457 accounts, 20% of women had more than $500K, compared to 31% of men.

Many financial advisors recommend saving for a retirement where you've 70% of your salary, but most retirees don't meet that criteria.

According to the Goldman Sachs survey, 74% of respondents live on less than 70%, and specifically 24% of women live on below 40%, compared to 18% of men.

Despite this, levels of dissatisfaction with retirement income is not especially high among those surveyed; just 31% of women and 18% of men reported they were somewhat or very dissatisfied.

This highlights how personalized retirement goals are; each person's retirement vision should be assessed individually, rather than be benchmarked against a particular standard.

With an aging society and high childcare costs continuing, more individuals, and especially women, will need to balance caregiving responsibilities with their retirement savings responsibilities.

In 1960, just 18m Americans were over the age of 65, but this figure rose to 54 by 2020, and is expected to grow to 80m by 2040. Additionally, the cost of daycare and preschool has risen 129% since 2000.

Employers can help women close the retirement gap by ensuring pay equality within their organization, by offering free or subsidized childcare, giving a generous pension contribution to both full-time and part-time workers, and by supporting and promoting women who return from career breaks.

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