17 Ways Women Miss Out on Retirement Savings

The financial obstacles faced by women in America are no small challenge. As has been reported by the media time and again, the gender pay gap in this country continues to be a significant reality. Women today make, on average, 85% of what their male counterparts do, according to research from the Pew Research Center. This fact has a ripple effect on women's lives, including leaving them far less prepared for retirement than men. The pay shortfall is merely one of the ways women miss out on accumulating enough of a nest egg to see them through retirement. Here are some of the other reasons women continue to enter their retirement years with far less money than men.

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One of the biggest reasons women are not as financially prepared for retirement as men is behavioral, says Leanna Haakons, founder of Black Hawk Financial. "The fear of investing causes women to get started later," says Haakons. But women shouldn't be so afraid to dip their toe in the investing pool, as they tend to be better investors, says Haakons. "Though it may take them longer to get started, out of fear or lack of knowledge and conviction — women often make more calculated, well thought-out and well-researched decisions once they start investing," she says.

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Fear of investing isn't the only challenge women face. They also tend to spend less time working overall than men do, says Haakons of Black Hawk Financial. "For example, women tend to take on more full-time caregiver roles in the family such as caring for children and elderly parents, which often cuts into their money-making years," she says. "They're also more likely to be downsized or laid off throughout their careers."

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As referenced at the start of this story, the pay gap is a huge challenge for women. But here's a closer look at how this plays out. Another study, this one from Payscale, points out that women made only 81 cents for every dollar a man earned in 2020. "That creates an average negative impact of $900,000 over a 40-year career, plus the lost compounding interest on your investments over those years," says Haakons, of Black Hawk Financial. "If you're a minority, the gap is even bigger. On average, black women in the U.S. are paid 38% less than white men and 21% less than white women."

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Only about one in five women, or 19%, have a written retirement plan, according to a study from the TransAmerica Center for Retirement Studies. "Most women plan their retirement too late in their career or don't have a plan at all," says Ben Reynolds, CEO and founder of SureDividend. "On average, women outlive men, so they need to determine when they're going to retire, how much money to save, and figure out the various ways they can benefit from multiple types of retirement plans."

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The pandemic has had a profound impact on the lives of women, far greater in some cases then on the lives of men. This has included more women losing or quitting jobs than men, as most women carry the load of caring for children and completing housework. "This will result in fewer women focusing on working out a retirement plan when 2020 has wrought so many distractions and less opportunity to put money into their retirement accounts," says Reynolds of SureDividend.

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It goes without saying that when women work less, their accumulated Social Security benefits take a direct hit in the form of reduced contributions. Yet despite this fact, women are significantly more likely to expect to rely on Social Security during retirement (28%) than men (21%), according to the report from the TransAmerica Center for Retirement Studies.

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Divorce has a variety of impacts on a woman's life, not the least of which is a loss or reduction of retirement benefits. "About 40% to 50% of marriages lead to divorce and women aren't often in control of the family's finances," says Dee Olateru, CPA, financial blogger and creator of The Rich Immigrant. "As a result, women do not always get a fair share of their spouses retirement investments during the split."

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Women are almost twice as likely to work part-time than men, says Olateru, of The Rich Immigrant. "This is perhaps one of the most glaring reasons that women end up with less in retirement," explains Olateru. "Part-time work often equates lower pay, and less access to retirement programs. While an IRA (Individual Retirement Account) remains an option, many women are not aware of these or do not prioritize this option. And an IRA alone does not make-up for the absence of a 401k or 403b retirement plan."

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Women are rarely as comfortable as men at negotiating better salaries for themselves, either when taking a job or at raise time. This single fact has a profound impact on a woman's lifetime of earnings and their retirement funds. "It's important, when negotiating salary increases, to consider not only your current lifestyle needs but also what you need in terms of your retirement savings plan," says Allie Fleder, chief operating officer of SimplyWise, a retirement savings fintech.

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Maternity leave is another major life event that cuts into a woman's retirement savings, says Erica Seppala, a financial analyst with the small business website Merchant Maverick. "Under the Family and Medical Leave Act, employers that meet certain conditions are required to provide 12 weeks of annual unpaid maternity leave. While this is a critical time for maternal recovery and bonding with a baby, three months without pay can cut significantly into savings," says Seppala. "Especially if a woman births or adopts multiple children during their years with a company."

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Given their role as the primary caregiver in many families, women often self-select lower paying jobs that offer more schedule flexibility, says Seppala, of MerchantMaverick. "This cuts into their pay and ultimately means they're saving less," says Seppala. "But it allows them to provide care to ill family members or pick-up and care for their children after school or over the summer."

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The report from Transamerica Center for Retirement Studies also found that women who work full-time and had access to a retirement plan contributed less than their male counterparts – a median 7% of salaries, compared with 10% for men. "This can be attributed to women earning less and being less comfortable with the idea of investing and risk taking," says Richard Hill, president and lead advisor with Compass Financial.

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A primary form of retirement savings and wealth for many individuals is real estate, says Hill, of Compass Financial. But here too women fall short, particularly single women. A study from the Yale School of Management found there’s a gender gap in housing returns, notes Hill. "They believe the gender gap in housing returns is so large it may explain 30% of the gap in wealth accumulation between men and women at retirement," says Hill. The report used data covering 50 million housing transactions that took place over more than 25 years. At least some of the real estate gap was tied to gender differences in sale prices. "For example, data reveal that women buy the same property for approximately 2% more and sell for 2% less, negotiating smaller discounts relative to the listing price when buying and offering larger discounts when selling," says Hill. Specifically, single women lose out on an average of $1,600 per year when buying and selling property, compared to single men.

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A discussion about women and retirement would hardly be complete without shining a light on the even more challenging financial realities faced by single mothers. Of the almost 15 million single parent-led homes in the United States, more than 80% are led by women. "A single woman trying to raise a family is most likely using every cent she earns to provide for her family, leaving little or nothing to put into a retirement account," says Mary Alice Hughes, co-owner of Insurance Advantage & LMA Financial Services.

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It is also well-known that women are much more likely to go see doctors, specialists, and dentists on a routine basis, while men avoid routine medical care, says Hughes of Insurance Advantage & LMA Financial Services. "Women, therefore incur more medical expenses. And if this woman is single and raising kids, she has the children's medical expenses as well," explains Hughes. All of which, once again means less money for that woman to contribute to her retirement.

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Many women are trying so hard to simply get by that they don’t reach out for financial help or retirement planning assistance, says Hughes of Insurance Advantage & LMA Financial Services. "The single parent is not only working eight-plus hours a day, but she’s also trying to manage all school and extracurricular activities for her children," says Hughes. "At the end of the day, going to a financial workshop or calling a financial professional to make an appointment is not high on her priority list."

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