UpFront | Published in December 2016

Women Face Struggles While Saving And in Retirement

Career breaks add up, resulting in women spending significantly fewer years in the work force

By John Manganaro | December 2016
Art by You Jung Byun
A new report released from TIAA, “Income Insights: Gender Retirement Gap,” suggests that the barriers women face when it comes to planning for retirement are significant and long-lasting.
“We currently live in an era where gender equality is increasingly becoming the norm, but we also happen to live during a time with ample access to the data and tools necessary to draw more accurate conclusions,” says Diane Garnick, managing director and chief income strategist at TIAA, who penned the report. “The data enables us to identify the obstacles women face during their savings and retirement phases. The tools enable us to provide the clarity necessary for resolving the problem at hand.”
According to TIAA, the data points speak for themselves: In order for two recent college graduates to have the same amount of money saved for retirement, the average man would need to save 10% of his salary, while the average woman would need to save 18%. At the same time, generally speaking, TIAA found that women work for fewer years and receive fewer salary increases compared with men.
“Many retirement strategies assume workers will be in the work force for 40 years,” the TIAA report says. “The data demonstrates that neither men nor women tend to work that many years. Frequently, women take time off to have children and then do so again later in life to care for elderly parents. These career breaks add up, resulting in women spending significantly fewer years in the work force.”
In terms of the real data, men work an average of 38 years, while women average 29.
“This nine-year shortfall means that women work 75% of the years that men work,” TIAA observes. “This fact alone makes it immediately obvious that women need to save a higher percentage of their salary while they are working.”
Interestingly, TIAA found that the number of women opting to leave the work force to care for their children is on the rise. According to the Pew Research Center, at the turn of this last century, 23% of working-age women considered themselves to be stay-at-home mothers. Today, the number is nearly 30%.
“The largest share are married women with working husbands,” TIAA explains. “This may seem surprising, given the increase in educational achievement over that period. In 1970, only 7% of this group were college graduates, compared with 25% today.”
Further complicating the picture is that, despite how long women work, the gender pay-gap persists. According to the U.S. Census Bureau, in the general population, women still earn only 78 cents on the dollar relative to men.
TIAA goes on to observe that women live longer than men, adding yet another challenge in the form of increased spending, especially on health care. Once they reach age 65, women outlive men by 2.5 years, with life expectancies of 85.5 and 83, respectively.