Turns out I’m not the only female seriously behind on my retirement.
According to a T. Rowe Price study, Baby Boomer women have, on average, less than half what Baby Boomer men do in their 401(k) accounts: $59,000 vs. $138,000. While not quite as bad, Millennial women are on average $30,000 behind their male counterparts.
Of course, I’m technically Gen X (by about one year), but I’m guessing our numbers aren’t any better.
So what’s going on here?
Unequal wages (and savings rates)
Not to trot out the ole pay gap thing, but… Well, that’s a pretty big part of it.
The median incomes of the respondents showed that women earn about $27,000 less than men. And it stands to reason that when you have less, there’s simply less to save.
The lower wage also means lower Social Security payments once the women are retired. So once again they’ll lag behind men in retirement income.
But a lower income can’t be the only issue because women are also saving a smaller percentage of their pay than men. Yet 66% of women under-contributing say they’re saving as much as they can afford.
What gives? Why are men finding more money to contribute than women are?
Pink isn’t our color
Another component of the problem may be the pink tax. Life tends to be more expensive for women. There’s, ahem, monthly personal care products, makeup (which ain’t cheap — even the drugstore stuff tends to be $10-13 these days), and of course clothing.
Women’s clothing tends to be more expensive than men’s. Not to mention that we often need more of it for work. Men can get away with a couple pairs of pants and a few shirts and ties that they can interchange. Women need different skirts, pants, shirts and, usually, shoes.
And products marketed to women tend to be more expensive than general-use ones. I remember a post (I believe by Stefanie O’Connell) where the blogger found that a pain reliever for menstrual cramps was more expensive than the general pain reliever — even though it was the exact same medicine by the same company.
The parent trap
Stereotypically speaking single parents are more likely to be women. Which means some of these women could be shouldering daycare costs all on their own. And we’ve already talked about how expensive that can be.
Even once the kids are out of daycare, you have the expense that comes with school supplies, new clothes, extracurricular activities, etc. Again, if women are more likely than men to be single parents, they’re more likely to bear the expenses on their own.
The end result
In other words, a bigger percentage of women’s budgets is eaten up by expenses compared to men’s — which is a problem compounded by their earning so much less (on average) than men.
That necessarily means that a smaller percentage (of an already-smaller amount) is going to be left over for retirement.
Afraid to invest?
Still, another issue is simply that more women feel uninformed about investing compared to men. According to one study, only 52 percent of women said they felt confident about investing compared to 68% of men.
It was particularly bad with female Millennial respondents. Six three percent said that financial planning in general was too complicated to contemplate. (Though clearly some of them are overcoming this if they’re, on average, only $30,000 behind Millennial men in retirement savings.)
The point is that the majority of Millennial women’s (and 48% of women in general’s) confidence in investing is low, so fewer of them are likely to contribute — or, even if they do make some contributions, to understand how much of a priority they need to make it.
A bleak future outlook
Given all of this insecurity — financial and emotional (about finances) — is it any wonder that a lot more women than men believe they’ll have reduced circumstances in retirement?
Forty six percent of women (compared to 37% of men) think their standard of living will go down once they stop working. Only 1/3 of women thought that they would live better in retirement, compared to nearly half of men. (Though, given the savings rates in this country, it’s unlikely that half of men would really have their standard of living go up; so maybe some of those guys just haven’t done the math.)
Of course, given how much less women are saving, perhaps women are simply being realistic about life in retirement. Since they’re saving less, they know logically that their income won’t be as good, which means that, yep, their standard of living will have to go down.
Still, it’s a concerning trend, that such a large chunk of half of this country’s population has apparently made its peace with being worse off in retirement.
People joke about living on cat food, but I wonder how many are quasi-serious.
My own situation
I’m not in that group. But for a while I was in the population that felt like financial planning was too much to deal with.
I wanted to pay off the mortgage and I ignored retirement except for token $300 contributions. (I say “token” not because the amount is low necessarily but because I easily could’ve afford more if I’d said no to Tim more often and/or put a little less in savings.) I didn’t even bother opening a SEP-IRA because it seemed too daunting.
Still, I’ve finally gotten my act together, and I’m doing my best to make up for it now, socking away money each month into the SEP (which I finally started) and maxing out my Roth.
So I shouldn’t have to rely on the food bank or most social programs (except for Social Security, of course) in retirement. In fact, while my standard of living definitely won’t go up, it shouldn’t go down either. I don’t think, anyway. Retirement calculators are tricky, especially with future inflation and Social Security’s probable 80% fate.
I’m lucky
But I’m privileged to be in this situation. (As I know all too well from my days on disability.) I’m lucky enough to have the option of setting aside so much of my check.
That’s because I have a high income, and I don’t have student loans or kid expenses to pay for. Nothing eats up my income except slightly higher taxes and any lifestyle inflation.
A lot of women don’t have that privilege. I know that. It’s probably part of why so many of them feel overwhelmed by the idea of financial planning and why so many of them aren’t saving (or able to save) the ideal amounts.
What can we do?
Really, we can do is hope that more women discover personal finance blogs. Perhaps FIRE blogs, if that’s what gets them motivated to start saving. Or maybe more moderate blogs are better, so they don’t get discouraged thinking they could never replicate FIRE results.
But of course it does them no good to have the investing know-how if they don’t have the money to invest. So society needs to work on the pay gap to be sure that women are paid equally for the work they do.
But it’s not all about equal pay. It’s about the jobs that are paying them.
Some of the highest paid professions tend to be male-dominated (a coincidence I’m sure), so more emphasis needs to be put on encouraging women to go into fields like engineering, computer science and medicine. That means prodding little girls to take a more active interest in math and science in school.
Once they have the equivalent pay, we can make sure that women are better educated about financial planning so they learn that it’s not as overwhelming as it seems. And that, even if it is, they still need to take care of it (or pay someone else to).
But that’s for the future
Of course, all of these are sweeping reforms, which are unlikely to take place in time to help a lot of the people who need to be saving for retirement now. So in the meantime, we need to convince women to take a more active role in their saving.
What we need is more education about retirement saving, ones specifically geared toward women and encouraging them to be more active. Ideally, it would start in high school, but employers need to take steps too. And some are. Some employers are holding these types of seminars for employees. A friend’s company even gave employees time off during the day to attend an informational meeting. We need more of that.
All in all, I understand that retirement planning can be daunting. Obviously. I mean, I’m guilty of letting myself be intimidated to the point of barely bothering. But we can’t let ourselves be backed down by fear or uncertainty.
In the short-term, we need to find ways to get through to women about the importance of finding extra money in the budget (whenever possible) for retirement. And in the larger picture, we need to work on ways to level the playing field to give women a better chance to have the money to save.
Are you ahead or behind on retirement planning? What can we do about this gender gap in retirement savings?
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Is Bigfoot more real than retirement?
I feel behind in retirement, though statistically, I’m way ahead of most people-male or female. Statistics don’t do the calculations, and that’s where I feel behind, mostly due to what I anticipate will be huge medical insurance costs if I try and retire before 67 (and even then for supplemental). The trade off, I am hoping for, is that my everyday quality of life and the stress of working full time will off set what financially might seem like a diminished, proportionately, retirement income. I won’t have the stress of the work week, so overspending on the weekend or an after work happy hour. We’ll see. We have to have tight control on our spending the next four years for our last college kid, and I’ll still put the max in my 401K, we’ll max our Roth, but the end of month cash savings will take a hit.
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I think it’s really amazing that you’re able to help out your kids with college and still do so well in saving for retirement. I also think you’re right that spending will probably go down in retirement as you don’t have to compensate for work stressors. And there will be a different level of social interaction. When you go out with coworkers, it’s usually to spend money. I feel like in retirement, people are a bit more circumspect about spending, so more frugal activities can/will be chosen. Not to mention the option of senior centers where you can socialize for nothing or next to nothing.
I’m glad you’re ahead of the curve in retirement, but I’m sorry that you still feel behind. My therapist reminds me that even though I don’t have much (comparatively) saved, I’m still way ahead of a lot of people. So I should calm down a bit and/or pat myself on the back for the progress I’m making now. I try to remember that, but it’s tough.
Women definitely have more obstacles to overcome men in terms of work and retirement unfortunately.
The pink tax is definitely real and of course there is time not working in late stages of pregnancy and maternity leave following it. Definitely hard to make up that kind of gaps when compared to man who works straight through or at most takes a week off.
It is sad but even in medicine there is a pay gap with most specialties having men out earn women.
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Wow, the pay gap is in medicine too? That’s awful. I thought for sure that’d be one area where the gap is practically nonexistent, since so many doctors set their own prices. But I suppose plenty of doctors work for hospitals and networks and other places that would set their pay. So I guess it makes sense.
Good point about the ding of pregnancy/maternity leave. I didn’t even think of that, but it definitely affects pay. And/or makes employers more cautious about hiring female workers, biased and outdated as that is. One of these days we’ll get true equality. One of these days.
I’m a woman in a STEM profession. I used to think getting more women into STEM would help with STEM diversity, at least, and perhaps with women’s economic status.
But girls already do better than boys in math classes in school prior to college. Of women and men with the same grades in difficult STEM college majors, men will persist with lower grades whereas women will shift to something else. Women in tech last an average of about 10 years before switching to something else. When a field becomes female-dominated (like pharmacy), wages drop. When a field becomes more male dominated (like computer science), wages rise.
A few women will be able to fight through the BS in male dominated careers and make good money. But most will be weeded out. More or less by design.
BECAUSE women’s fertility is more constrained then mens, encouraging them to go for fields that require graduate degrees- but do not pay a lot- is a questionable proposition (true of many but not all STEM degrees- we really need to stylize it sTEm with a specific asterisk for health related science careers to reflect the size of the job markets). BECAUSE women, on average, live longer but spend more years in poor health, they NEED to save MUCH more for retirement.
I don’t have solutions, but the first place is to start with honestly. One of the great things about reading personal finance blogs and bogleheads for me has been to realize how many *missteps* are possible and people can still finagle secure retirements.
But on average women can withstand fewer missteps. That is a fact.
Women aren’t screwed because they take less of an interest, or do a poorer job with investing. They are screwed because they don’t get paid enough.
Interesting stuff about women in STEM (and about pay rising and falling in sectors based on the dominant gender). Thank you for sharing.
Yep, a huge part of the issue is pay and of course the associated costs of being a woman. But we do also have to account for the fact that women are investing less of their pay. I think a lot of it comes down to the issue of women not feeling confident or being overwhelmed by the thought of financial planning. We need that earlier education to teach women that saving for retirement (while more difficult on a sometimes-to-often lower salary) is entirely doable. Even if that just means throwing it all in Vanguard funds and letting the experts do their thing (my current method).
The pink tax and wage gap has been debunked multiple times. See:
Women are able to make choices just like men. Women don’t “need” more clothes, different pain relievers, or different colored items. If a blue thing is cheaper than a pink thing, get the cheap one.
Sorry to be a hater but perpetuating victimization myths like this are not helping.
Obviously, yes, we should opt for the cheaper item. Unfortunately, not all women are aware that different pricing occurs. Should they look more carefully at the active ingredients? Yep. But no one’s perfect. Here’s hoping more of them are getting eagle-eyed over time.
And agree to disagree on the clothes thing. Women are judged harshly on their dress. They can’t wear the same few things over and over the way a man can without judgment. And some of that judgment may come from higher up, which can affect promotion chances, as ridiculous as that can be.
As for the wage gap, it’s very, very real. Heck as I mentioned in the post, the female respondents made on average $27,000 less than their male counterparts. With more lobbying for equal pay, women are sometimes able to get higher wages that are equal to a man’s. But first they need to know that they’re being paid less, which is practically impossible since people rarely discuss their income at work.
This isn’t a victim mentality. There’s a difference between being a victim of often-subtle-but-still-there, age-old biases and having a victim mentality. A victim mentality implies complacence in the face of adversity. Women aren’t content to sit back and make less money; they’re fighting for equal pay. But again, first they have to know or sure they’re being paid less. And of course they can’t be too demanding lest they come off as pushy, which is seen as admirable in men (fighting for what’s fair! knowing his worth!) and condemned for the most part in women (bitchy! shrill!). It’s a delicate, exhausting balance.
The wage gap and the pink tax are undeniably real. People need to stop the right wing propaganda go to their head: that stuff will rot your brain.
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Agreed.
Those stats at the beginning are terrifying! As someone who wants to see women in empowered, I found this to be a provocative post. Also, as someone whose mom just retired (and 2020 has been called the worst year to retire ever), I feel like I should talk to her and get into the nitty-gritty of her situation. She seems so lost about it (and I’ve learned so much blogging around here that it’s hard to hold it back)! I agree – we need to encourage women to take a more active role in their planning. I’ve told her the biggest thing she can start doing now is TRACKING HER SPENDING. She kind of looked at me like I was nuts.
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Tracking spending is essential. Your mom might be surprised (or really annoyed) at how much money has been slipping through the cracks, probably for years or maybe for decades. You can’t send your dollars where you want them to go until you figure out what’s happening to them now.
I suggest you have her read this free chapter of my book, too:
https://docs.google.com/document/d/1WcyrT1_92_qh6cphpc_kKvwK5O8CLumZa_rPwiFg37c
This chapter is called “Challenge Yourself to Save” and it offers more than 30 examples of “stealth savings,” i.e., ways to find extra money in even the tightest budget. I make the chapter available for free because I strongly believe in saving for an emergency fund as well as for future purchases, the way Abigail does with categories like “eventual new car” or “vacation.”
Good luck to her! Keep helping!
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Thanks as always for sharing that resource. I can’t imagine how many people it’s helped!
It’s definitely true that tracking spending is integral. You won’t know where/how much you need to trim (or just know that you’ll be okay) unless you have at least a basic idea of where your money is going.
I definitely find the Baby Boomer stats in particular terrifying. But not terribly surprising, I suppose, since Boomer women were more likely to stay home (I’d think) or simply have lower-paying jobs since things like engineering weren’t really options for women when they were getting into the workforce. Let alone things like computer science.
We definitely need to encourage women to be active in planning. Now we just have to figure out how to do that.
I don’t think T Rowe did a good job with their stats. They say Millennial women have 30k less saved, but it doesn’t say what their average balances are, so it’s basically useless information. Is 30k 1% less or 50% less? (Of course I can agree having less saved than men isn’t good.)
Talking amongst ourselves is the hugest first step in getting people/women to save for retirement. Back in my mid-20s I was fortunate to get turned onto the concepts of 401ks and that I was on my own for planning for retirement. I’ve been fortunate to have jobs that offer retirement plans and I have taken advantage of all of them, since I first became eligible in my late 20s. I just realized I’ve been saving for retirement for 21 years! My retirement accounts are old enough to drink!
So, I think I’m on track for retirement. BUT I also want to retire as soon as freaking possible (probably late 50s/when my house is paid off) and health care is going to be a huge factor in that decision. Also – of course no one can agree what “on track” even is, as far as I can tell. If you find some good data about where we would ideally be at various ages, I’d love to see a follow-up!
I know there are articles about where you “should” be in retirement savings at different ages, but I can’t remember where I’ve seen them. If I can jog my memory I’ll try to do something on it.
Glad to hear you’re on track for retirement. You’re definitely lucky to have had jobs that have retirement plans with, I assume, some matching savings. That’s always a great help, but of course you did a lot of heavy lifting yourself from the sound of it.
Now go buy your retirement savings a beer, now that it’s old enough to drink!
When I was married long ago, I moved a lot because of my husband’s job. He made a lot more, so we relocated whenever he got transferred. I am probably not the only one. I would take whatever job I could find at the time, so my career track was not moving along as it would have otherwise. My pay scale stayed low and I missed out on getting vested in 401K more than once. We split up and I had pretty much nothing.
I started saving seriously when I turned almost 40. I am in my 50s, so I should have 6 times my salary, per an article I read. I don’t have that much yet, but I’m getting closer. I recently compiled my retirement accounts from previous jobs into one account. It seemed easier to keep track of. I also bought my first house about 5 years ago. I want somewhere to live when I’m old, so I have been working toward getting it paid off and having all of the big repair/remodel jobs done.
I have had a job title that pays less, when I did similar tasks to someone who just happened to be male, but didn’t have to answer phones in addition to his regular work. Hopefully this is happening a lot less than it used to.
I’m sorry to hear that your marriage stymied your retirement savings so much. I’m glad you’re rebounding so nicely and that you were able to get a house while still saving for retirement.
And sorry to hear about your previous job’s disparity between you and the guy. I do hope that it’s happening less, but I’m skeptical.
Hard work and saving and investing (owning a piece of American and international companies) are the solution, not blaming men or life. Taking advantage of compounding interest over long periods of time. Educating yourself on all these topics. These things are available to all Americans due to our capitalist, mostly free-market system. Become an earner, not a payer of interest. Anyone who bemoans “income inequality” is actually advocating for a non-free market solution, that is, Socialism/Communism, and those economic systems never have been successful.
I don’t think advocating for equal pay for men and women equates to socialism. If a man and a woman are doing the same job, it’s not communism to say that they should be paid the same wage. If you’re working plenty hard but getting paid less than your coworkers, you’re going to have a much harder time saving at the same rate.
Education is a big part of it so that women are saving and investing, as you suggested. But you can’t expect the sexes to save at equal rates when being paid at unequal ones.
I’m ahead on retirement, but only because I was a saver by nature as a young child. And because I saw my mother struggling after my parents got divorced. I never wanted to be in that position, and I had the temperament and drive to prioritize saving over fun and ease in my 20s and 30s. I read up on investing, created a plan, and did what I needed to do to set myself up for a more secure present and–hopefully–a more secure future.
That said, as a married person with a child, I’m aware of the financial hit that has come into my life with my husband and even more so with giving birth. My life is a lot more expensive than it was when I was a single person living comfortably in a studio apartment because I’m paying the majority of what it would take to support 2 adults and one child. (I was and still am the higher-earner in my relationship… but we’re living larger than I would if I was on my own. We’re not crazy out of control, but I pay the mortgage and utilities on a house that’s bigger than I would have picked, I pay for all of the groceries, plus I pay all child-related expenses including daycare.)
On top of that, and much more upsetting, is that I lost income after giving birth, and I don’t see it bouncing back, even 3 years later. It feels unjust because I can–and do– work 55-hour weeks when the job calls for it and I still do good work. But my work hours are constrained to when daycare is open and my child is healthy enough to go. Holidays and child sick days are an ongoing source of work stress. I don’t take time off if I get sick, but I have no choice if my kid does. I’ve outright been told that “we would’ve given you this, but we aren’t sure if it’ll require evenings/weekends, so we’re giving it to someone else.” I’m certain that there have been things I’ve been passed over for that I haven’t been told about. I read an article a month or two ago about how women with children are hugely penalized when workplaces get greedy for time, and that’s definitely the case for me.
Comparatively speaking, I could care less about the pink tax and I feel fine for PF knowledge. It’s a much bigger deal to me and to my retirement that I’m being routinely, literally, devalued in the workplace for something that as a culture, we put on women.
I’m so sorry that your work is passing you over — so routinely, no less. You’re right that women with kids tend to get penalized far more than men with kids, since it’s often the mom who does the daycare pickup. That’s yet another factor I hadn’t considered, but it must affect income in relation to raises and promotions.
Sorry to hear that you have to cover so many of the household expenses. I know from personal experience how frustrating/wearying that can be at times, though I’m assuming your husband kicks in more than Tim could contribute. It can still wear thin, I imagine. I’m also sorry that you ended up living a little larger than you’re comfortable with. It’s trying at times, again as I know from personal experience. I was at least lucky that we couldn’t afford to buy too much house when we were looking.
I’m at least glad that you were able to start saving so early on. That has to have benefitted your retirement greatly. Perhaps that’ll provide some comfort when you get particularly annoyed with the situation at work.
As a woman who earns 6 figures and puts away $25,000 a year in retirement, this post and the comments are so sad. Women need to go for what they want and not have an excuse. High income jobs are stressful. Do you want it or are you happy with less? Please do not make excuses for women. Some people, men and women, are lazy or have no drive.
I can’t argue that no one is lazy. But not everyone can earn six figures or anything close to that. They may not have the skills for the high-income jobs. And not everyone is equipped to learn them — I’d be hopeless at computer science or engineering, for example. And even those who could learn… That’s assuming they have the opportunity to go to school and learn the skills.
Besides, this isn’t just about earning. It’s about the confidence to do financial planning and start saving for retirement. If you weren’t raised a certain way, that’s intimidating stuff. Should they get over it? Yes. But it’s not that easy/simple. Hell, it took me til age 39 to open a SEP and age 40 to fully fund a regular (well, Roth) IRA. It took me that long to get over my fears about having less in savings and putting more in retirement. It took me that long to get over the intimidation factor of how big and scary and alien retirement accounts seemed. And I consider myself a fairly intelligent person. There’s more to it than just telling people to earn more money, even when that’s possible.
That said, it’s great that you’re saving so much for retirement. Sounds like you’ll have quite the cushy post-work life and that you’ve earned it!