What Women Need to Know About Retirement

Chapter One: Women and Retirement Income: Some Facts to Get You Thinking Planning for the future can be a daunting task. The younger you are, the easier it is to put it off until next month or next year. The older you are, the harder it is to find the time and the energy. Both men and women need to plan for how they will pay the bills during their retirement years. But it is especially important for women, who live on average four years longer than men and as a result need more income. It’s important to understand the facts and learn how to plan for the future. Over the next two decades, nearly 40 million women will reach retirement age. Unfortunately, our nation’s retirement system was created at a time when men were the primary wage earners and women worked at home; the system has not kept up with the times. Some women today are fortunate enough to be able to rely on a stable retirement income based on three sources known as the three-legged stool: 1) Social Security benefits, 2) income from an employer-provided retirement plan, and 3) individual savings. In theory, these three legs stand strong and provide enough income to pay the bills, cover health care costs, weather unforeseen tragedies like illness or the death of a spouse and, in the case of Social Security, adjust fully to rising inflation. However, for most women, that three-legged retirement stool is wobbly at best. Many older women rely on Social Security as their only income source in retirement; they have no retirement plan and little savings. Many also took time out of the workforce to raise children or to take care of a family member who was ill, and often when they returned to work, it was to low-wage jobs with no benefits. Women take an average 13 years out of the workforce for family caregiving. Generally, financial experts suggest that people plan to replace between 70 and 90 percent of pre-retirement income if they want to maintain their current lifestyle during the estimated 20 to 30 years spent in retirement. But because of their longer lives, lower pay and lack of benefits, women need to replace even more than that—some experts suggest at least a 100 percent replacement rate. Why Women Are Falling Short: Some Basics To spend their retirement years in comfort and security, women must start planning early. The first step in this process is understanding why retirement security is so elusive by looking at some of the most basic and troublesome facts about women’s earnings, work status, life expectancy, marital status, and retirement income: Earnings • Two-thirds of working women earn less than $30,000 a year. • Nearly half of all women work in low-paying jobs without retirement plans or 401(k)s. • Women earn on average 77 cents for every dollar earned by men.