Why women need to save more than men

Men and women may not be on equal footing when it comes to investing for the future. Generally, women work fewer years and earn less than men, but they also tend to live longer. Therefore, women must focus on the concerns that are unique to them when planning for retirement. Many married women actively participate or take the leading role in managing family finances. Moreover, women generally outnumber men in participation in investment clubs across America.

Obstacles remain: lower pay compounded by fewer working years

The median earnings of working-age women who worked full-time, year-round were $42,692 in 2019, compared to $52,364 for men.1 Because they earn less, women may be unable to invest as much as men. In order to make up for other discrepancies in retirement benefits, women may actually need to invest more.

For example, because women often leave work to bring up children or care for elderly relatives, they have fewer total work hours. On average, 42% of women said they reduced work hours to care for a child or family member, compared to only 28% of men.1

This often means that women qualify for much lower pension benefits. Fewer years in the workforce, fewer years with a single employer, and lower pay are all factors that may contribute to a lower average pension for female retirees. At the same time, women on average live longer than men, so they must provide for more years in retirement than their male counterparts.

Social security statistics favor men

Women also tend to receive lower Social Security benefits than men. In 2019, the average annual Social Security income received by women 65 years and older was $13,505, compared to $17,374 for men. Yet, Social Security income is much more important to the financial wellbeing of women than it is for men. For unmarried women, including widows, age 65 and older, Social Security comprised 47% of their total income in 2019, compared with 34% for men.1

Women live longer

Finally, because women generally tend to live longer than men, not only can they expect to spend more years in retirement, but they must consider that a couple's retirement savings may be diminished by health care costs for the spouse who dies first. According to the Centers for Disease Control and Prevention, the average life expectancy of a 65-year old woman today is approximately three years longer than it is for a man.2

Saving more just to catch up

The earnings of women have tended to increase in recent years. This could mean that potentially more investments will be made by women.

Nonetheless, the bottom line is that in order to make up for differences in earnings and benefits, and more retirement years due to longer life spans, women have to invest more to fund their retirement.

What women may need to do

  • Carefully consider how much risk you are willing to take in exchange for the potential to earn higher returns. Historically, equity investments have generally provided higher returns over the long term than less-risky investments like money markets and short-term bonds. Keep in mind, however, that equities offer long-term growth potential but may fluctuate more, could incur loss of principal value, and provide less current income than other investments.
  • Obtain information about the retirement benefits that are available through your employer, and actively participate in any plans offered.
  • Learn about the investment vehicles that can help you reach your retirement goals. Your financial professional is an excellent source of information and guidance to help you sort through the many choices available.
  • Contact local professional/trade associations, women's groups, community colleges, and adult education centers in your area for information on investment or personal finance seminars taking place.
  • Recognize the unique challenges you may face and start saving and investing as early as possible to overcome them.

It's always a good idea to consult your financial professional before you develop a savings and investment program.

Morningstar, 100 Must-Know Statistics About Women and Retirement, March 3, 2021.

2 Centers for Disease Control and Prevention, Mortality in the United States, 2020, NCHS Data Brief No. 427, December 2021.

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