As we’ve been going about our careers, most of us have focused intently on the gender wage gap. The one that shows women earning, on average, just 82 cents for every $1 earned by men. The one that, depressingly, shows only a nine-cent improvement of our standing since the turn of the 21st Century.
But now that we’re seeing retirement in our future, or are already there, here’s something new to think about. We’ve got a big problem with our retirement funding, compared to men.
That’s the findings of a new report, How Does Gender Equality Affect Women in Retirement, by the Brookings Institute. It seems that our shittier paychecks impacts us significantly even when we’re no longer working. Great!
“For a variety of reasons, women earn less on average over the course of a lifetime than men do. Lower lifetime earnings make it harder for women to save for retirement,” say the authors of the study.
Lower Earnings: Biting Us Then…And Now
Women’s Social Security benefits are, on average, 80 percent of men’s.
The reasons women make less over the span of their careers are pretty well known. We take care of the kids, which can cause us to interrupt our earnings trajectory, take on gigs and part-time work, or settle for lower paying work in exchange for flexibility. “Caregiving provided during women’s 20s and 30s, when careers are formed, creates career-long earning losses,” the authors report. One study found that a woman with one child earns 28 percent less on average over her career than a woman without children, partially because of time out of the work force. But here’s the insult to injury: “In sharp contrast, becoming a father typically does not reduce a man’s earnings.”
Then once we get kids raised, a lot of us get dinged financially because it’s time to take care of our parents. This, of course, is a responsibility that predominantly falls on women over the age of 50. The authors say, “People [read: women, as we’ve established] who leave the labor force early to care for an elderly relative lose an average of $142,000 in wages.”
What’s more, women’s Social Security benefits are, on average, 80 percent of men’s. Benefits are based on a person’s 35 highest earning years. Women with long career interruptions risk not having 35 years with positive earnings. That nasty wage gap reduces women’s benefits. The motherhood penalty applies here, too. Having one child reduces a woman’s Social Security benefits (through reduced earnings) by an average of 16 percent. Each additional child increases the gap by two percent. Women who leave work to care for an elderly family member not only lose wages, but they also lose an average of $131,000 in lifetime Social Security benefits.
Living Longer, Getting Poorer
Poverty rates for women rise with age.
We all know that women have a longer life expectancy than men (yeah us!), but this isn’t always a benefit. We’ve got to make less money last longer. In 2020, average life expectancy at age 65 is 21.1 years for women and 18.6 years for men. With a similar amount in savings at age 65, women have about seven percent less to spend per year than men. (Cancel that pedicure appointment now!) This means that women are more likely to run out of retirement savings, especially because older women are more commonly the surviving partner, living on less Social Security income and with their partner’s medical bills.
It’s not surprising then that poverty rates for women rise with age—from 8.6 percent among women aged 65 to 69 to 13.5 percent among women aged 80 or older—and marital status plays a part. In 2017, among elderly women, the poverty rate was 4.3 percent for those who were married, 13.9 percent for widows, 15.8 percent for divorced women, and 21.5 percent for never-married women.
This is awful news because more and more women who get to retirement age are divorced or unmarried. In every marital status group, women with children had higher poverty rates than women without children, a pattern that does not hold for men. Grrrrrr. This is a disheartening statistic because aren’t kids supposed to help their mom stay afloat? At the very least in exchange for that crucial nine-month commitment she made to them early on?
6 Ideas for Fixing the Problem
The Brookings Institute report makes several policy recommendations that could help, if not us, then maybe our daughters? It will mean changing not just the retirement system but also labor market policies, which is daunting since that means fighting all-mighty capitalism.
Here’s the dream:
- With a robust federal paid family and medical leave program, people could save for retirement and earn Social Security credits while providing care to children and relatives.
- Under a Social Security caregiver credit, the government would assign a value to caregiving work that would be used as part of Social Security benefit calculations.
- Subsidizing high-quality childcare would enable more mothers to remain in the workforce.
- Reform the tax code either to provide a second-earner tax credit or to tax individuals rather than families, both of which would improve incentives for married women to work.
- Adopt a nationwide automatic IRA program could make most of the 55 million workers who aren’t part of an employer-sponsored plan eligible to participate in a tax-preferred retirement program.
- Strengthening the social safety net is key. For example, boosting Supplemental Security Income benefits to close the gap between Social Security income and the poverty threshold could lift nearly five million elderly people, a majority of whom are women, out of poverty.
As we contemplate what a post-COVID world will look like, let’s think about what we can do to help women like us remain solvent as we’re aging boldly.