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Even with decades of progress toward workplace equality, one financial divide remains a prevalent issue to this day: the gender retirement gap. It’s a quiet crisis that has developed over several years, but now is the time for employers to address this issue head-on.
It’s no secret that women earn less than men in the workforce, but what people forget to recognize is this pay disparity compounds over time, leading to retirement inequities. Consider this staggering statistic from a recent Newsweek poll: on average, men have nearly double the savings of their female counterparts.
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Why does this happen? Essentially, the gender retirement gap is just an extension of the gender pay gap. While the wage gap is narrowing, women typically on average earn 84 cents for every dollar earned by men, so they have fewer dollars to invest and contribute to retirement accounts. Specifically, the gap is widest for women aged between 55-64 years old. According to the U.S. Census Bureau, in 2018 women in this age group earned an average of 75% of what their male counterparts made. By comparison, women aged 35 to 44 earned 80.1%, while the gap was narrowest for women aged 20 to 24, who earned 89.1% of men’s wages. As a result, women’s retirement savings can fall short by 20% or more compared to men’s, simply because their wages are consistently lower over a lifetime.
Beyond pay disparities, women are more likely than men to take career breaks or work part-time due to caregiving responsibilities, particularly for children or aging family members. These career interruptions often lead to fewer years of earnings and less opportunity to build retirement savings. Plus, women generally live longer than men, meaning they need to make their savings last longer. And, when it comes to investing, women tend to be less confident than men and may take a more conservative approach, which can lead to lower returns over time.
With all of that said, women can succeed both at home and in their careers, while also paving the way for a secure financial future.
How employers can help close the gap
Employers have a vital part to play in bridging the gender retirement gap by creating policies that bolster women’s long-term financial security. Here’s how employers can make a real impact today:
- Equal pay for equal work: The most direct way to shrink the gender retirement gap? Close the pay gap. Conduct regular pay equity audits, be transparent about salary ranges and ensure equal pay for equal work. When women earn what they deserve, their retirement savings naturally follow suit.
- Encourage retirement plan contribution: Women are less likely to participate in employer-sponsored retirement plans, often due to lower earnings or part-time employment. Employers can boost participation by offering automatic enrollment in 401(k) plans, increasing default contribution rates and providing more generous matching contributions for lower-earning employees.
- Be flexible: With caregiving responsibilities often falling more heavily on women, providing options or remote work or part-time positions can help them maintain employment and continue contributing to their retirement. Additionally, paid time off can alleviate some of the pressure without jeopardizing their financial future.
- Educate women about finances: Financial literacy is power. Offer financial wellness programs, investment coaching, and tools that help women take control of their financial futures. These workshops can empower women to make savvy retirement savings choices that can be life changing.
In her role as president, Denise Stefan leads strategic planning efforts for Engage Insurance, LLC and directs the company in fulfilling its mission of providing stable, cost-effective insurance solutions to Engage clients.
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