Women and Retirement

I don't know about Get Rich Slowly readers, but I can tell you that the majority of Motley Fool readers are guys, and that's true of most financial publications.

That men are more likely to be consumers of investment information could explain the gender gap in financial literacy — especially among older Americans — that some studies have uncovered. I don't mean to demean the better-smelling sex; in fact, some studies have found women deliver better investment returns than men do. But the deficit in financial literacy is especially troubling given the other challenges women face in retirement planning. Some of these challenges are faced by all women, while others pose particular problems for women who are or were married, especially if they put their careers on hold to raise a family.

The Troubling Statistics
Here are some stats to put it in perspective:

  • Women, on average, earn 76% of what men earn, resulting in an average lifetime earnings differential of $250,000.
  • Women leave the workforce for an average of 12 years to raise children or care for relatives, resulting in a loss of $550,000 in wages over their lifetimes.
  • The average woman lives five years longer than the average man. Sounds good, but it means women have to stretch their retirement savings longer.
  • Some of the biggest health-care costs are incurred in the year prior to death, which reduces financial resources left to surviving family members. Those survivors are most likely to be women, since wives tend to outlive their husbands.
  • Women of the baby boom generation are more likely to be divorced than women from other generations and to have fewer children to rely on in their old age.
  • A couple must have been married 10 years before an ex can claim spousal Social Security benefits. But most divorces occur within the first seven years.

In addition, here are some sobering facts from the Center for Retirement Research:

  • As employers drop defined-benefit plans (pensions) for defined-contribution plans (401(k)s), divorced women may suffer. According to the center's director, Alicia Munnell, “Traditional pensions give wives an automatic claim on their spouse's benefits, but 40l(k) plans usually do not.”
  • Despite being an average of three years younger than their spouses, wives usually retire when their husbands do. This can cut short their careers, savings, and retirement benefits.
  • Among single women 65 and older, 28.2% are considered poor or near poor, compared with 22.7% for non-married men and 8.1% for married people in the same age group.
  • A married couple's combined Social Security benefit is reduced by one-third to one-half when one spouse dies. Also, payments received from a defined-benefit pension might be reduced or eliminated.

What's a Woman to Do?
The solution for all women — single, married, widowed, or divorced — is to take control of their financial futures. It stands to reason that since women live longer, they should consider retiring later. Postponing retirement can mean a larger nest egg and Social Security benefits. Note that Social Security benefits are based on your highest 35 years of earnings. If you worked fewer than 35 years, those no- and low-earning years might be used to calculate your benefit. By working a few more years, you can increase your benefit. Also, non-working spouses can contribute to a spousal IRA, allowing for more tax-advantaged savings.

For married couples, both spouses should be involved in the day-to-day management of the finances. If one person handles the finances and the other doesn't want to take over after he or she becomes widowed, assemble a list of trusted advisors who could assume those duties.

Remember that a married person can receive a Social Security benefit based on his or her work record or their spouse's work record, whichever is greater. Because of their lower lifetime earnings, approximately two-thirds of wives receive benefits based on their husband's record. But if the husband applies for Social Security benefits early — and thus receives a reduced monthly payment — the survivor benefit will also be lower.

For this reason, husbands should consider postponing the application for Social Security benefits as long as possible. The same principle generally applies to defined-benefit pensions, so be sure to consider the benefit to the surviving spouse when you're deciding when to receive your pension and in what form.

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Sam
Sam
10 years ago

I think the data presented is spot-on. Even highly educated, highly compensated women often interrupt their careers to take time off for preganancy, child birth and child rearing. Even women who limit time off for child related issues often end up earning less than peer males due to perception of commitment (i.e. the mommy track). Women don’t want to think about the “what ifs” – what if I get divorced, what if my husband dies, and the more common, these days, what if my husband gets laid off – and many choose to take extended time off for kids with… Read more »

Susan Klopfer
Susan Klopfer
8 years ago
Reply to  Sam

As someone who worked for many years in corporate American, I found the best solution was to go to work for myself, and build a small business. I’m having far too much fun writing books and blogging. It takes a while, but it also takes me away from sex and age discrimination, something that I was getting “sick and tired of being sick and tired” of…the quote, by the way, is from the late Fannie Lou Hamer, a great woman and a great activist in the modern civil rights movement. She was a strong woman who stood her ground and… Read more »

mm
mm
10 years ago

Great post. I am a young woman, but this post is very informative to me and all the women in my family. Thank you so much. Such a wake up call for me this morning

Allison
Allison
10 years ago

Great article with lots of intersting info. All those statistics are why I fully funded a Roth IRA for 2008 and 2009, on top of a 10% contribution to my 401K at work. I want to make sure I save as much for retirement as a I can now, so that when I take some time off work to start and raise kids, I won’t be so far behind.

Mrs. Money
Mrs. Money
10 years ago

I think it’s interesting I’m ready to retire at 26! 😉

I second Allison’s comment 100%.

gail vaz-oxlade
gail vaz-oxlade
10 years ago

When I wrote A Woman of Independent Means, I did it because women face some unique issues. Years later we have made some progress but are still behind the eight-ball in some areas. I’m happy to report an enormous population of women on my site… perhaps because I’m a goil, or because I’m writing about money in a way that women find useful. I probably have an 80/20 split in favour or women. But I don’t talk a lot about investing, more about taking control of your money, the day-to-day dos and don’ts and relationship issues. I have found that… Read more »

Holly
Holly
10 years ago

These are problems that many women don’t realize until they run smack into them. My husband wants to take an early retirement (at age 42, thus a reduced benefit) so that he can embark on a second career. I have been asking him to carefully weigh the options since I am aware that, if he passes before I do, I will only receive 40% of his already greatly reduced pension benefit. He just wants to do his thing…

Sarah
Sarah
10 years ago

“That men are more likely to be consumers of investment information could explain the gender gap in financial literacy – especially among older Americans – that some studies have uncovered.”

I am requesting the links/research citing for this statement. Which studies/when.

namesarehardtopick
namesarehardtopick
10 years ago

I’m doing a study right now solely on Echo Boomers regarding finances, and although there are some positive financial aspects of the Echo Boom (for instance, the wage gap between males and females of the same profession is more equal), the average debt of females greatly exceeds males in two main areas: student loans and credit card debt. Remember, though, females are more likely to pursue college than males, so the student loans are not surprising. Males, however, are more likely to have auto loan debt than females. As far as investing goes, when I ask Echo Boomers how much… Read more »

Karen
Karen
10 years ago

This is such a great topic to emphasize! I would like to add that it is such a mistake for many women to ignore their finances simply because they don’t identify as “feminists”. The fact is, you can’t rely on a man to always be around to take care of you, even if that is what you want. I also think that particularly for younger working women, this should be a huge wake-up call. They need to be saving money for their futures, and not just spending it all, assuming that prince charming will swoop in at some point and… Read more »

Allison
Allison
10 years ago

Sarah @7, there’s a 2006 study by Dr. Annamaria Lusardi of Dartmouth College that shows a gender gap in financial literacy. I couldn’t gain access to the actual research paper, but here’s an article where she talks about her research and its implications:
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4306

J.D.
J.D.
10 years ago

I’m about to head to the gym, but I wanted to pipe in quickly in response to Sarah (#7). I wanted more links, too, and would have used more if I’d written the article myself. But I know that from my own reading on the subject, that Robert’s not making this stuff up. There is a financial literacy gap between the genders and it’s not because women are stupid or lazy or anything like that. It’s because of the reasons Robert cites. Yet when women do take an active role in their finances, they generally do a better job than… Read more »

KC
KC
10 years ago

I think that these statistics are changing, perhaps slowly, but are changing – then again I run with a pretty affluent (college educated) group of women – in their mid 50s and younger. But most of the women I am around are involved in their families finances and investing – a few even own businesses with their husbands or own a business of their own. In fact when we get together for lunch we talk about family, tennis, and stocks, seriously…stocks. But like so many other aspects of society women are becoming more involved and more equal. And, I believe,… Read more »

guinness416
guinness416
10 years ago

Will be interested to follow the comments on this one. And Gail does indeed rock! GRS seems to have an awful lot of women commenting, including me, and I know when TSD did his advertising survey it said the majority of his readership was female (although maybe that just means women are more likely to fill in surveys). And Ramit’s case studies seem to me to disproportionately feature women. So definitely a different audience, I think, on the moneyblogs to Motley Fool, which is great too. Sort of a weird time for women and finances now, we’re the majority of… Read more »

S.E.
S.E.
10 years ago

Although I am a woman, I am totally “into” money, financial management, etc. In fact, I am working on become a CPA this year. It has been my experience that what Robert is saying is right on. I have thought a lot about my future, and began investing when I was in college. I mostly owe this to my mother, who, although a boomer, was the person who handled the money in our family. However, this arrangement seems to be the exception, as far as my own personal anecdotal evidence is concerned. Few (none?) of my female friends seem to… Read more »

Elizabeth
Elizabeth
10 years ago

Great post! But there’s one thing I would like to add. It’s true that women live longer than men, but life expectancy only tells half the story. If you look at health adjusted life expectancy instead, you see that women spend more years of their lives than men living with a chronic illness or disability.

In other words, longer lives don’t necessarily mean healthier lives. I’m trying to plan for that financially, as it may mean extra $$$ for health costs and keeping my career flexible enough to work part time before and after into retirement.

Manu
Manu
10 years ago

Thanks for touching upon this topic in such excellent detail. Hopefully a lot of women read it, and it prompts them to give some thought to their own future. We women can sometimes feel that taking care of ourselves is selfish, but really, it may be one of the most loving things we can do for our families. Imagine, if I plan my finances for old age, I am way less likely to be a financial burden to my children. On the other hand, maybe I should be a burden to them (kidding.) I am going to send every woman… Read more »

Beth
Beth
10 years ago

@ guinness416 — Right on! My parents raised me to have the skills and education to support myself no matter what my marital status. Good thing too — Despite my dream to marry right out of university have kids a few years later, life had other plans! 🙂

I thought this post presented some interesting ideas without being condescending or patronizing (which I’m seen in many articles on the topic). It’s tricky — I don’t want to be treated differently because I’m a woman, but on the other hand I can’t ignore the stats that aren’t working in my favour!

Suzanne
Suzanne
10 years ago

So how does a woman protect herself from falling behind if she stays home for a period and then gets divorced? I know too many women in that situation.They don’t have to stay home, I suppose.

TosaJen
TosaJen
10 years ago

Here’s hoping that it’s a passing generational thing. I’m doing my bit to make sure my kids know more about money than I did when I left the nest, both the boy and the girl. I’ve noticed in my own family that most of the women of my generation (GenX) are more financially aware and responsible than then men — I guess we got the message that we need to do it for ourselves. However, most of the women of my parents’ generation (WWII + Boomers) in the same family don’t have much of a clue when it comes to… Read more »

Adam
Adam
10 years ago

I really think the women growing up today are going to want to be involved in their finances a bit more than our mothers and grandmothers. At least, the women I know and hang around with are for some reason much more likely to be contributing to their 401(k)s in large amounts and concerned about their retirements than the guys. Anecdotal I guess, but I still think its changing for the better.

And men are closing the life expectancy gap, slowly but surely!
PS GAIL! I didn’t know she was on this site. Yay Canada!

Andrea
Andrea
10 years ago

I find this post interesting in timing especially since reports came out yesterday that in fact women who are married often are earning more than their spouses and are taking on more of an even split in financial decisions within the household.

Kevin
Kevin
10 years ago

Suzanne: The simple answer is, “don’t get divorced.” Of course, what that really means is, make sure you marry the right person. Having kids just compounds the problem, so the full advice would be “don’t marry and have kids with the wrong person.” I think too many people are so eager to have the story book life, with the husband and the 2.5 kids, that they’re willing to overlook a few faults and rush into marriage. Of course, after a few years, those faults are no longer so easy to overlook, but by then, the damage is done. Kids have… Read more »

Carrie
Carrie
10 years ago

I am a professional woman who early retired at age 51. I have always been fascinated by money and manage our finances (I have to force my husband to look at quarterly statements). However, I have worked with many powerful at work “feminists” who foist off their financial responsibilities onto their husbands as soon as they get married if they can get away with it. Other women who are on their own or married in dire financial situations don’t want to know, because they know deep down if they look closely they will have to take action. The behaviors I… Read more »

SAM
SAM
10 years ago
For interesting insights on what this looks like in practice, see the following article from the NY Times’ “Modern Love” column.

http://www.nytimes.com/2006/01/01/fashion/sundaystyles/01LOVE.html?_r=1

Terrifying.

elysianconfusion
elysianconfusion
10 years ago

J.D., do you have any idea about the gender split for your readership is on this site? Robert, the reasons you cite in your article are huge contributors to why I wanted to return to work. I stayed home for three years (most likely losing a lot in potential retirement), but staying home longer simply didn’t seem like an option. Although my husband and I are happy, I look at my parents — where my father retired early and took benefits early and then they split up and my mother will get basically no social security benefits due to working… Read more »

kaitlyn
kaitlyn
10 years ago

I would like to see stats on the growing number of women that deviate from this. For instance, my fiance and I have discussed that if I were to get pregnant (heaven forbid), he would be the one to drop out of the workforce, not me. It took some time for him to warm up to the idea, given that he had been raised with the “women stay home and cook/clean/caretake” mentality, but that is not me. I’d be an awful SAHM. He’d be an excellent SAHD.

Geek
Geek
10 years ago

The “mommy gap” is easily solved if both parents are required to take time off for a child (and an equal amount). The mommy perception gap is sexism – “Oh, that female worker is worth less because she might take more care of the kids”. Sexism (and a big assumption.) I read on cnn money yesterday that something like 22% of women outearn their husbands now. I think in 30 years the retirement picture for women will look very different. I’d be very interested in seeing a breakdown by age. Not that I’m saying we can afford to let older… Read more »

Amy
Amy
10 years ago

This is great information. A real wakeup call for women (and married men) everywhere. Having said that, I find it offensive that this article almost admonishes women for staying at home (you are losing your potential retirement income!) and places way too much emphasis on social security. Like Geek said, it’s a broken system. I’m not counting on getting hardly anything back of what I have to put into it over my working career. I don’t think it’ll will last that long unless someone changes some major legislation. With that in mind, I avoid debt and save as much as… Read more »

Mel
Mel
10 years ago

As a woman, I can say it wouldn’t occur to me to regularly read financial sites like Motley Fool, but I stop by GRS at least three times a week.

I’m the primary money manager in our household, but I don’t need or want the kind of in-depth investing advice some financial sites thrive on. I just want a steady diet of encouragement, suggestions and stories about what has worked for others.

Micro-managing finances isn’t for us. Good is just fine; we don’t need perfection. GRS suggests strategies to build wealth without getting bogged down in minutia.

Lindsay
Lindsay
10 years ago

Thanks for addressing this issue. It’s something I’ve been giving a great deal of thought to lately, especially as my husband and I consider whether we are ready to start a family. In our case, I am the money manager of the family, an arrangement my husband seems quite content with. He doesn’t have to worry about the bills, taxes, or investing unless he wants to. I basically have a handle on everything and feel that this will provide some balance to the relationship should I decide to take time off work to raise children. Then again, there are days… Read more »

Nicole
Nicole
10 years ago

#7 Sarah and #11 JD — they’re studies done using the HRS, health and retirement survey. I believe they’re by Mitchell and Luzadis, though there are some other researchers at RAND and Michigan whose work has uncovered the same summary statistics in the same dataset. Robert– if you like the BC CRR policy briefs, there are 3 RRCs (retirement research consortium). The other two are Michigan and NBER. The Michigan RRC is the one that has the working papers and briefs for financial literacy. They’re also connected with RAND, so you should be able to access RAND’s white papers through… Read more »

Shara
Shara
10 years ago

@Geek, It isn’t sexism. Most women I know WANT to be the one at home, and therefore are more likely to drop out of the workforce. I had this conversation with my manager after I had a child so he would know what to expect from me. He is very supportive of the choices I make, but if I choose not to put in the extra hours on a project like my peers do, then I don’t get as good of ratings, and therefore raises. Every manager I know is very careful to NOT assume a woman is going to… Read more »

Nicole
Nicole
10 years ago

Ah man, Allison #10 beat me to the link. Here’s one of their papers: http://ideas.repec.org/p/crp/wpaper/72.html

elisabeth
elisabeth
10 years ago

Although older women are more likely to be poor, I think they are also more likely to know how to live on a budget …

Beth
Beth
10 years ago

@ Shara — Yes, it’s sexism. You’ve already got the job and the family. If you’re trying to get a job or interview for a better position with another company, that’s another story! When managers assume that women aren’t going to be as valuable employees because they’re focused on their family, then that hurts all women. Especially those of us who are single! Why should I be judged based on another woman’s performance? Many men I know have stayed home with their kids, and I think that’s fantastic. However, many middle-aged employers aren’t that forward thinking — yet. When they… Read more »

Tyler Karaszewski
Tyler Karaszewski
10 years ago

The article says”[women] should consider retiring later”. The reason that women retire at the same time their husbands do should be obvious — a single retired spouse largely defeats the purpose. You can’t go travel across the country or move to Florida if your spouse is still working. What’s a man supposed to do for 3-5 years while his wife is still working? So couples retire at the same time. My wife is 30 and doesn’t work. She volunteers at a nature reserve and helps out her elderly father. I’m the sole breadwinner in our household. Your advice about when… Read more »

Debbie M
Debbie M
10 years ago

@guinees416 and geek, it’s funny to me that you think younger women have an advantage. I think people like me raised during the feminist movement in the 1970s have an advantage because we’ve been trained to realize we’re equal in a way that has not trickled down as well as I’d like. For example, I expect women to ask men out the same percentage of time that men ask women out. (Whoever’s less chicken would do it first, right?) But while my generation approached that, the one after mine didn’t. Probably being single and childless helped me, too. Having a… Read more »

Peggy
Peggy
10 years ago

A good post that raises some interesting points, but I don’t think we can safely assume that Social Security in 30 or 40 years is going to look like anything like the Social Security that retirees have today. Probably the retirement age will be raised to at least 75 by the time that I retire, if nothing else.

Becky
Becky
10 years ago

I think this is a strongly generational issue. I’m not sure where the cutoff is, but I’m 40 and what I have seen is that for my age and younger, women are far more concerned about financies and planning for the future than men. This might be related to the issues you quote. Generally speaking, the men I know are more confident in their ability to earn more in a pinch (construction workers earn more than nannies), and also to get by with less. (Guys consider living in their car a pain in the butt – women, a nightmare.) Woman… Read more »

E
E
10 years ago

Funny, my husband reads Motley Fool and I read GRS. 😀 I pay most bills and do the taxes. I invest in my own retirement accounts and he dabbles in stocks. He’s older than me so I do expect to outlive him, possibly by quite a bit. He has no savings and a spotty work history, so I doubt he’ll have much to leave behind. I focus on my retirement because I expect to live a long time; I don’t expect to be able to count on Social Security; and if my husband has expensive health problems late in life,… Read more »

T
T
10 years ago

I agree with Mel #29, this is the kind of advice/encouragement I am looking for, not stock advice (most of the time!) I really enjoyed and learned a lot from David Bach’s Smart Women Finish Rich. I felt a little silly reading it at first, but he won me over with his sincerity, thoroughness, and readability. So it doesn’t ALL have to come from female financial gurus 🙂 And it’s still applicable to men, too, in most cases – he implicitly makes a strong argument for couples to be equally involved and educated about their finances, particularly for the “what… Read more »

Diane
Diane
10 years ago

Great post and very much on the target. I agree with Robert about men being more interested and involved in investing their money. I have been a member of the American Association for Individual Investors (AAII) for over 10 years. It is depressing to go to presentations with 50 – 60 audience members and see only 5 or 6 women in attendance. S.E. #14 Just like S.E., I was the go-to person when I was in the corporate world as an Accounting Manager. Many friends and colleagues would seek out my advice on what to invest in their 401(k) plans… Read more »

M
M
10 years ago

I manage our investments, my husband pays the bills. I enjoy planning our investments, and appreciate the sense of security I get from knowing how much we are saving. The whole discussion of retirement, especially as it intersects with the ideas of caregiving (children and other family members), scares me. A lot. I think we as a society really need to decide how we want to value caregiving. Is it “work” if a nanny/daycare/nursing home employee does it, but not if I do it for my own family members? (How inefficient is it is we all hire someone else to… Read more »

sandi_k
sandi_k
10 years ago

Hmm. I am apparently not a “typical” woman. Surprise, surprise…. – I read Motley Fool as well as GRS. One is for specific advice on investing, the other is for encouragement and mind-set. – I do the bills, the taxes, the investing, the refinancing and financial planning for both of us. – I was the one who applied for the SBA loan that allowed DH to buy his own business 10 years ago. – I have far more in retirement assets than he does; I started at 25, he started at 32 on my insistence. – My brother is a… Read more »

M
M
10 years ago

I should also add that, in preparation of giving myself the option of being a stay at home mom, I spent my 20’s working in a high-starting-salary field (engineering), and stuffed as much in retirement accounts and after tax accounts as possible. If I stay married we should be able to live a very luxurious retirement. If we divorce, I’d have to get myself retrained in a new field (engineering is hard to go back to after a few years break) and scramble until I can start tapping into those retirement accounts. I would be ok, I think, but the… Read more »

Nicole
Nicole
10 years ago

The Dave Ramsey people say that the majority of the people they get in their classes are women. And with the couples they say it is mostly wives bringing their husbands. Back before fool.com branched out to specific stock investing, I got a lot of information there. Now I only turn to it when looking for that article on how to buy a car with a fax machine/email when someone I know is about to buy a new car. According to the O’Dean article on gender differences in stock investing, women are much more likely to pick an index fund… Read more »

KEN
KEN
10 years ago

These statistics are sobering. I need to re-evaluate my family’s plan. I want my stay at home (working) wife to be in the best position possible.
Great post!

schmei
schmei
10 years ago

I’m a woman, the primary (soon to be sole) breadwinner of our two-person household and the manager of our finances. I also read GRS nigh-daily, and I don’t think this is a coincidence. JD’s accessible writing style helped get me interested in getting our finances straightened out. I don’t think he appealed to me as a woman, he appealed to me as a person in debt who didn’t know much about money management. I think this is why this site has such a broad range of readers/commenters… both men and women.

Jay
Jay
10 years ago

As a Chartered Accountant I get the women coming in – in thier late 30’s or early 40’s to tell me that they are thinking about divorcing thier spouse, but: the house is in his name, the cars (all of them) are in his name, the bank account is joint, the credit cards (all of them) are in his name… etc. etc. etc.

I understand it somewhat when a lady in her 60’s comes in and tells me that, but someone in her 30’s??

Chett
Chett
10 years ago

I don’t have time to read all the comments so forgive me if what I say is repetative. Roberts statistics are sound. I address this topic when I do personal finance workshops for elementary teachers (of which about 85% of the workforce is made up of) This is what I tell them. 1. Make sure you are aware of all investments and accounts and how they are titled and who the beneficiaries are. If he won’t discuss this or tell you where they are there are some serious trust issues. 2. If income needs to be replaced by one spouse… Read more »

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