Women and Retirement: Backwards and in High Heels | Elizabeth Cox
Americans are so woefully unprepared for retirement that some policy makers are starting to take notice. When it comes to retirement planning, women are like Ginger Rogers paired with Fred Astaire: we have to do everything a man does to prepare, but backwards and in high heels. The consequence is that while full-time working white women in the United States earn only 78 cents for every dollar men earn, the income gap for women in retirement is far wider, with total income for women over age 65 at just 55 percent of older men’s income (Sen Patty Murray Report on The Gender Retirement Gap). Both genders need better retirement options, but women are punished financially for our personal propensity to care. Our frequently interrupted income stream leads to hardship financially in retirement years. We need to consider our looming retirement crisis as a human catastrophe and a women’s economic empowerment issue. Remember the mantra: Control our Money, Control our Destiny. Without reform and planning for our futures, we control neither.
There are several reasons for the retirement income disparity between women and men. It is no secret that women are more likely to work in part-time jobs that do not qualify for a retirement plan and generally seek more flexibility in the workplace than men. This is especially true for mothers and other caregivers. In fact, mothers earn only 71 cents for every dollar paid to a father, and we contribute only 50 cents to retirement plans for every dollar a man does. These statistics are significantly starker for Latinx and African American individuals (NWLC).
Fortunately, Social Security is still a lynchpin to our retirement system. But on average, that only replaces about 40 percent of income earned. It’s up to us to fund the rest throughout our working lives. You haven’t started yet? You just need to pay off your mortgage/rent payment, medical bills, car loan, or college loans first? You’re not alone. Right now the majority of Americans over age 50 have less than $30,000 total in retirement savings, while men in aggregate have retirement account balances that are 50 percent larger than those of women (Vanguard study: 2015). As George Bernard Shaw said, “A mark of an educated person is that he or she can be emotionally moved by statistics,” and we must stay vigilant in educating women and girls to manage money well.
Here are some alarming statistics:
- Of the 161 million workers in the United States, 54 percent or 87 million do not have access to a retirement plan at work (Retirement Equity Lab).
- Women are 80 percent more likely than men to be impoverished in retirement National Institute on Retirement Security.
- 42% of working women lack financial security (CNN.Com).
- Women over 65 live more than 2 years longer than men in this age group on average
The Female Financial Paradox can explain part of this lack of preparedness. This is a phenomenon where although a growing number of women are now the family breadwinners and up to 90 percent of women identify as chief bill-payer of the household, we still tend to shy away from larger financial decisions like investing and retirement. We need to take charge and realize that in a do-it-yourself retirement system, we have to put money aside each and every month for our future. No one else will do this for us, and being self-sufficient financially in our senior years is not only a help to us but also a big help to our loved ones. If we run out of money late in life, we are often creating a tremendous burden for the very people we devoted our income to early on.
So if you haven’t started already, my best advice is to begin saving early and often. Even if you save just a small amount per paycheck, the cumulative effect will help you tremendously later on. It’s all about discipline and consistency. The easiest way to accomplish this to set up automated payment from your paycheck or other source of income into a designated savings account. Follow Warren Buffett’s advice: “Do not save what is left after spending; instead spend what is left after saving.”
But my problem with the Female Financial Paradox is that it blames each individual instead of looking for a collective solution. If 90 percent of a certain group fails to live up to expectations, we need to address the system that leads to such dire results. I spoke recently with Teresa Ghilarducci, director of the Retirement Equity Lab at the New School about alternatives to our DIY retirement system. Ghilarducci is a pioneer and longtime advocate of Guaranteed Retirement Accounts (GRAs), a public-private system to ensure retirement income for all workers. She says that a mandatory retirement system would help most workers and especially women overcome some of the obstacles that limit our saving. Women are more likely than men to move in and out of the workforce and seek out employment that offers flexibility. Many of our employers simply do not offer retirement plans.
Finally, our government is beginning to recognize the severity of the situation. The federal government has put into place regulations supporting state efforts to provide Retirement Savings Accounts (auto-IRAs) to workers not covered by employer plans. Since 2015, seven states covering 23 million workers, including Connecticut, New Jersey, and California, have enacted retirement reform, and 28 other states, including New York, are considering similar legislation. But on February 15th, a Republican led House of Representatives advanced two bills to overturn federal rules that would make it simpler for states to start these auto-IRAs. The financial industry opposes these plans as fees would be kept low and transparent, a boon for Main Street but at the expense of Wall Street.
We need to view this attack on proposed retirement plans as an attack on low to middle-income workers, the majority of whom are women. We need to contact our U.S. Senators and Congressmen and urge them to support the Department of Labor rulings for retirement savings accounts. In New York, we need our representatives to pass Assembly Bill A4982, Secure Choice, that was first introduced in August 2015 and currently sits in Assembly Committee. We need to rise up and demand that our government works for us now, girls and women, males and females, so we have dignity in our senior years.
Elizabeth Cox is a Certified Financial Planner™ and Certified Public Accountant deeply committed to helping clients every step of the way to achieve financial strength and independence through life transitions. She provides clients with a broad range of financial services including personal financial planning, retirement and tax planning. Ms. Cox is founder of the blog: www.ourmoneyourselves.org.