Retirement Confidence Gap for Married and Unmarried Women

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Retirement Confidence Gap for Married and Unmarried Women

It’s no secret that the gender wage gap has remained remarkably obstinate for our lifetime and, inevitably, becomes a significant shortfall at retirement. While divorced, widowed women are more likely to retire earlier than expected, never-married women don’t know where to turn for financial advice.

New research from the Employee Benefit Research Institute (EBRI) suggests that women would benefit from retirement advice that considers their marital status.

The study which compared retirement behaviors amongst more than 1,500 workers and 1,100 retirees, found that unmarried women have lower retirement confidence than married women and are more likely to have lower financial assets. According to the data, while 56% of women who had never been married and 58% of divorced women had less than $25,000 in assets, only 27% of married women could say the same.

What’s more, unmarried retirees are also more likely to say that their expenses were higher than they expected and are more likely to have retired earlier than planned.

Other key findings of the report include:

  • Women who have never been married were more likely to say saving for retirement is not a top priority.
  • Women who had never been married are more likely to say they don’t know where to turn for financial advice, with 45% of them – nearly half – not knowing who to ask.
  • Married women retirees were more likely to say their retirement lifestyle is better than they expected. On the flip side, divorced or widowed retirees were more likely to say the retirement lifestyle is worse than they expected.
  • While 42% of married women retirees retired earlier than expected, that number was up to 51% for divorced and widowed retirees.

In 2020, women made 83 cents for every dollar earned by men, according to the U.S. Census Bureau. The gap persists despite women’s increasing levels of education and even widens among higher-income workers.

By the end of a woman’s career, a full-time worker will have lost out on $417,400 of income, the Center for American Progress found. So how does this discrimination continue to happen?

In 2019, 57.4 percent of all women participated in the labor force. This was up from 57.1 percent who participated in 2018, but 2.6 percentage points below the peak of 60.0 percent in 1999.

From these statistics alone, women have clearly made some strides in the workplace. Unfortunately, when it comes to retirement, many women still do not have the savings they need.

People undeniably live longer today than they did in the past. But for behavioral, biological, and other reasons, not everyone benefits equally from the gains in life expectancy.

Women outlive men in almost every society. In more developed countries, the average life expectancy at birth is 79 years for women, 72 years for men. In less developed countries, where high maternal mortality reduces the difference in longevity, women can expect to live an average of 66 years, compared with 63 years for men.

Also, lower wages, less cumulative time in the workforce, and work and pay gaps associated with exiting and reentering the workplace mean women tend to have lower Social Security balances (as well as reduced assets, smaller pensions and fewer opportunities to save or contribute to their retirement plans).

Get to know your spending habits! That will allow you to identify the regular expenses that could be siphoning money away from your long-term goals. Once you have realistically made an estimate of your spending, you can begin to see where you can invest for the future.

Some retirement savings strategies to consider include:

  1. 401(K) Plans

If your company provides a 401(k), you’re in luck, for 2021, your individual 401(k) contribution limit is $19,500, or $26,000 if you’re age 50 or older. In 2022, 401(k) contribution limits for individuals are $20,500, or $27,000 if you’re 50 or older. These individual limits are cumulative across 401(k) plans. Don’t have access to a 401(k)? You can still save in an IRA. The combined annual contribution limit for Roth and traditional IRAs is $6,000 or $7,000 if you’re age 50 or older for the 2021 and 2022 tax years. You can only contribute to an IRA if what you contribute comes from what is considered earned income.

  1. Spousal IRA

If you leave the workforce for a few years and you are still married, (and your spouse is still employed) consider establishing a spousal individual retirement account. Contribution limits for spousal IRAs are the same as for regular IRAs. For 2021, that’s $6,000 per account, or $7,000 if you’re age 50 or older. You need to file a joint tax return to fund a spousal IRA.

Bear in mind that rules apply: One spouse must be earning income in order to sock money away into an IRA. The couple must file a joint income tax return, and they must also be married.

  1. Social Security

More years in retirement mean women have a greater chance of exhausting other sources of income, making them more dependent on Social Security. While Social Security can’t fund your retirement alone, those benefits can play a big role in helping you pay the bills.

If you’re behind on savings, you can compensate by delaying your benefits and boosting them in the process. Specifically, for each year you hold off on benefits past your full retirement age, which, for today’s workers, is 66, 67, or 66 and a certain number of months, you’ll boost your payments by 8%.

The catch? This incentive runs out when you reach 70 – so don’t delay these benefits past that point.

  1. Work Longer

It may not be what you want to hear, but if you’re willing to extend your career, you’ll get to collect a paycheck for longer, therefore providing an opportunity to boost your savings, hold off on Social Security, and avoid dipping into your nest egg.

Also don’t discount the possibility of working in some capacity once you leave your full-time job. Whether you choose to consult for a few hours a week in your former field or start a business you’re passionate about, retirement offers ample opportunity to work part-time and generate income. And that’s a good way to make up for lost savings.

Whether married, divorced, widowed or single; every woman, no matter what her current financial situation is, should assume a more active role in her financial well-being. If you feel like you need help talk with a retirement financial advisor at CKS Summit Group to get a sense of how you should invest to reach your goals — and do it as early as possible. The sooner you take steps to increase your savings, the less likely you are to run into financial trouble once retirement comes to be.

Set up your complimentary strategy session with us by clicking here, or simply give us a call on 586-286-5820. We look forward to working with you to bring you fresh new ideas for your retirement income.