Why women can't afford to retire

Saving millions of dollars for retirement seems dubious for those in the most secure financial situations. But for many women, making their salaries stretch between pay periods is the most they can hope for. Long-term savings is simply out of the picture. 

The U.S. Census Bureau estimates that nearly half of all Americans have no retirement savings to speak of. Yet women are in a much more precarious financial state than their male counterparts when it comes to their retirement readiness. Women's median 401(k) account balances were 65% lower than for men in 2022, according to investment management firm T. Rowe Price. Women also contribute 43% less annually to their investment accounts, adding $5,421 per year, compared to $9,578 for men. 

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As such, 62% of women expect to retire later than planned or not at all, according to research from Nationwide Insurance. Of those who plan to retire, 30% say they only have enough to last one to three years, according to separate research from Iralogix, a retirement industry fintech provider. 

"We weren't expecting just how dire the situation is for women and the extent to which they've fallen behind in their retirement preparations," says Lowell Smith, co-founder of Iralogix. "What's especially harrowing is how quickly even those who have saved for retirement are going to exhaust their savings." 

This is a problem, as women typically live longer than men and have more healthcare costs to manage in their later years. In fact, a woman retiring at 65 can anticipate spending $300,000 on healthcare, factoring in a life span of 90 years, according to predictions by the Milliman Retiree Health Cost Index. Men can anticipate costs of $264,000 in retirement, up to age 88. 

What's preventing women from saving for themselves? For starters, women begin their careers at an immediate disadvantage: saddled with more student loan debt than their male peers, they also enter jobs making less annual income. Overtime, caregiving drives them away from career acceleration and often out of their profession altogether. By the time they've reached retirement age, the time to learn about finances has long since passed. 

Read more: Student debt thwarts Americans saving for retirement 

"The gender wage gap widens into the gender wealth gap and then to a gender retirement gap," says Stacy Miller, a certified financial planner and partner at Bright Investments.   

A rocky start to retirement savings

While women now comprise 60% of enrolled college students, those educational opportunities aren't necessarily paying off. The average student loan debt balance for women is $30,296, compared to $29,621 for male borrowers, according to the American Association of University Women. Men are also more likely to get financial help from parents or other family, according to the Education Data Initiative.  

Read more: What the Supreme Court's ruling on student loan forgiveness means for employees 

Once they leave college, women are at an immediate pay disadvantage that will only snowball over time: Women start their careers with an average salary of $36,712, compared to a man's $40,092, according to the Bureau of Labor Statistics. In 2023, women still make 82 cents to the dollar a man makes, and those pennies add up to nearly $400,000 in additional lifetime income for men over their working lives. 

While there is the potential for women to catch up, more education means more debt. Women would need to earn a master's degree — at an added debt of $83,651 — to exceed the lifetime earnings of their male peers with associate degrees, according to the American Association of University Women. 

For Alexis McDonald, a talent acquisition recruiter with Avangrid, an outstanding student loan balance affected her ability to save for retirement. As the mother of two small children, money was always on her mind. 

"Not having my student loans go into collections was very important to me, and putting less money into my 401(k) and dipping into my 401(k), I wanted to avoid that, but I wasn't able to," she recently told EBN. "It was a daily struggle — emotionally, mentally, always just trying to figure out the best way to approach getting these paid in a timely manner, but making sure my family was provided for as well." 

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McDonald was able to take advantage of her company's student loan repayment benefit, which is helping her chip away at her final $30,000 of student debt. Yet not all employees find themselves with such generous benefits: In 2022, just 7% of employers offered a student loan repayment plan, according to the Society for Human Resource Management. 

The financial toll of caregiving

Like so many mothers, McDonald has the financial responsibility of raising a family, too.  Caregiving in particular, while generous of women to provide, is not generous to their financial stability in the long-term. 

It's estimated that 75% of all caregivers are women, according to the Institute on Aging, and AARP reports that 61% of caregivers will cut back their work hours or take a leave of absence, reducing their income and ability to save extra cash. Four percent will choose an early retirement due to caregiving needs.

"Taking time off work to care for children and aging parents means fewer opportunities for contributing to workplace retirement plans and fewer opportunities for pay raises and promotions," Miller says. "This also means they might stop saving, start withdrawing from savings or take on debt." 

'Not nearly enough has been done'

With these financial barriers standing in their way, it's necessary to provide women with a financial education early on in their careers. However, that's not how the financial services industry — or employers — have typically operated, says Smith. 

"Not nearly enough has been done to structure educational outreaches designed specifically for women," he says. "Thus, we're stuck with these one-size-fits-all retirement savings educational programs, which fail to account for the fact that women and men approach financial issues — including retirement saving — in very different ways." 

Read more: TIAA warns that women are unprepared for retirement

However, younger generations of women in particular are increasingly interested in setting themselves up for financial success early. A report by Northwestern Mutual found that 60% of Gen Z women feel confident in their ability to retire, compared to the average of 44% across generations. However, 79% of Gen Z women feel their financial education could use improvement.  

"It's not uncommon to meet women who are ashamed of how little they feel they understand their financial lives," says Brenna Baucum, founder of Collective Wealth Planning. "Provide financial education to employees through presentations for the entire team or one-on-one time with each staff person. Poll your staff on what they want to know. Some may seek guidance on making sense of their investment statement, while others wonder how much they may need to retire." 

And while progress has been slow to close the wage gap entirely, legislative efforts are being made that could benefit female employees: Within SECURE 2.0, a 2024 provision gives employers an opportunity to match an employee's student loan amount with a contribution into a retirement fund. Additionally, the legislation will also provide retirement benefits to part-time workers, a demographic that is 64% women. 

"Together, we can help [women] move forward from a position of power," Baucum says.