Women and retirement savings—three challenges that hinder success

Gender equity in the workplace is top of mind for employers and the media. Retirement savings is an equally important, but less talked about, gender gap that’s creating financial stress for women. Let’s explore the financial and lifestyle challenges women face when saving for retirement and ways to help close this gap.

Women have made great strides in the workplace, assuming leadership roles and breaking glass ceilings. But despite these achievements, many still struggle to accumulate meaningful retirement savings, further compounding their financial stress. What’s behind these struggles? The unique professional and personal issues they encounter compared with men. 

Retirement planning challenge #1: compensation

A comparison of median earnings shows women earn $0.82 for every $1 a man earns.1 So, it’s not surprising that the difference in retirement income is nearly identical, as illustrated below. This discrepancy means female workers have to contribute to their retirement plans at a higher rate than their male counterparts to achieve the same savings levels. Unfortunately, many are hesitant or unable to increase their contributions given other financial priorities.  

This pay disparity also affects Social Security, another key source of retirement income. Lower wages mean less Social Security income, which creates a vicious circle. To compensate for smaller payments, women have to rely more heavily on their workplace retirement plans and other personal savings. 

Median household retirement income at age 65 

Source: “Still Shortchanged: An Update on Women’s Retirement Preparedness,” National Institute on Retirement Security, May 2020.

Retirement planning challenge #2: family circumstances

On the home front, family responsibilities interrupt many women’s career paths, affecting their overall earnings potential, their ability to save, and their eventual Social Security benefits. That’s because, although traditional gender roles have blurred, women still serve as the primary caregiver for both children and adult family members. Of the roughly 53 million American caregivers, 61% are female.2 Being a caregiver often means stepping away from the labor force for months or years at a time or switching to part-time work. Case in point, a significant number of women are thinking about altering their work situation due to added family responsibilities caused by the pandemic.3 With less income flowing in, it’s harder to save for retirement. And it’s often difficult to make up the lost time and contributions when the caregiver resumes her career, despite the best intentions. These job gaps can also affect her future Social Security payments by reducing the earnings history used to calculate benefits.

Mothers more likely than fathers to consider changing their work situation due to COVID-19

Source: “Women in the Workplace,” McKinsey & Company, 2020.

Retirement planning challenge #3: longevity

Many women fail to consider longevity risks when planning for retirement, resulting in inadequate savings levels. The average life expectancy of a 65-year-old woman is 85.4 But many live well past this age—approximately 64% of the people over 85 are female.5 A longer life expectancy translates into a longer retirement, requiring savings that may need to last 20, 30, 40 years, or more. It also means having to plan for higher healthcare costs and, if they’re married, the possibility that they may spend part of their retirement alone. In 2019, 31% of the people age 65 and older were widows.6

Closing the gap and reducing financial stress

These challenges can seem daunting, as they’re not things that women can fully control. Gender inequity won’t change overnight. Life is full of unexpected events, and life expectancies will likely continue to rise given medical advances. But there are ways to help close the retirement savings gap. It starts by making sure women have access to the professional, personalized advice and tools they need to make the best use of their money now and in the future. People in general are more likely to follow through when they have a written financial plan that outlines clear steps for achieving their goals, something many women are lacking; however, they’re eager to receive this support and value financial wellness programs offered through their employers.

Women who have a financial plan for retirement compared with men

Source: In July 2020, John Hancock commissioned our seventh annual financial stress survey with the respected research firm Greenwald & Associates. An online survey of 589 workers was conducted between 7/28/20 and 8/14/20 to learn more about individual stress levels, their causes and effects, and strategies for relief. John Hancock and Greenwald & Associates are not affiliated, and neither is responsible for the liabilities of the other.

Comprehensive retirement planning helps women navigate the challenges they can’t fully control—gender inequity, family circumstances, and longevity—to keep moving forward to the future they envision.  

1 Income and Poverty in the United States: 2019,” U.S. Census Bureau, 9/15/2020. 2Caregiving in the U.S.,” AARP, May 2020. 3Women in the Workplace,” McKinsey & Company, 2020. 4 Period Life Expectancy—2020 OASDI Trustees Report,” U.S. Social Security Administration. 5 2019 American Community Survey 1-Year Estimates, U.S. Census Bureau. 62019 Profile of Older Americans,” the Administration for Community Living, a division of the U.S. Department of Health and Human Services, May 2020. 7 In July 2020, John Hancock commissioned our seventh annual financial stress survey with the respected research firm Greenwald & Associates. An online survey of 589 workers was conducted between 7/28/20 and 8/14/20 to learn more about individual stress levels, their causes and effects, and strategies for relief. John Hancock and Greenwald & Associates are not affiliated, and neither is responsible for the liabilities of the other.

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

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