Retirement planning isn’t an easy task for anyone, regardless of what stage of life they’re in. However, recent retirement discussions have highlighted that women face an additional challenge in saving for the future: the gender pay gap.
As employers or business owners, it’s vital to address this issue for the economic security of your female employees.
Let’s take a look at the long-term effects of the gender pay gap on women’s retirement savings and the steps that businesses can take…
Lower retirement savings mean lower Social Security benefits
The gender pay gap means women are paid less during their working years, resulting in lower retirement savings than their male counterparts. Since Social Security payments are based on an employee’s income during their working years, a lower salary would result in a lower benefit amount.
This issue would also result in women having a smaller retirement nest egg to rely on during their retirement years.
Longer life expectancies
Women, on average, live longer than men. According to Harvard Health, “57% of all those ages 65 and older are female. … The average lifespan is about 5 years longer for women than men in the U.S., and about 7 years longer worldwide.”
Due to these longer life expectancies, women have higher medical expenses, living expenses, and caregiver expenses, which, combined with lower retirement savings, often result in greater financial insecurity later in life.
Lack of retirement plan access
Women face an additional challenge as they are often employed in small businesses that don’t offer retirement plans like 401(k) and pensions.
In fact, “About 50% of women ages 55 to 66 have no personal retirement savings, compared to 47% of men,” as reported by the U.S. Census Bureau. The lack of retirement plan access means that women have to be even more proactive about saving for retirement.
Women face additional challenges in saving for retirement due to factors such as career interruptions, taking time off for caregiving, and other responsibilities. These challenges result in women earning less from work, saving less for retirement, and relying more on Social Security in retirement.
What employers and business owners can do
Simply put, businesses can address these issues by implementing transparent compensation policies and practices. This step would ensure that all employees are paid equitably, regardless of gender.
Additionally, offering retirement plans like 401(k) programs can improve access to retirement planning for all employees in the company. Employers can also support career development opportunities for women, to improve their earnings and increase their ability to save for their retirement years.
But what do you think? Are you a woman with a unique perspective on saving for retirement or a business owner that offers these kinds of benefits? We’d love to hear from you!