In every age group, women have lower incomes than men, but the gap is especially pronounced after retirement. In 2007, the median annual retirement income of older women was $8,152 just under two-thirds of the median annual retirement income for men the same age, $12,476--a difference of over $4,000 annually. This should not be surprising since retirement benefits are based on the accumulation of lifetime earnings, but it is a reality most people don’t consider until just before they are going to leave the paid work-force.

Reality Check

In theory, retirement income comes from three sources: Social Security, pensions and individual savings. In fact Social Security is the primary payer of benefits to retirees and it is a lifeline for many women. Today, almost 90 percent of women receive Social Security benefits--6 out of 10 have earned those benefits based on their own work. In contrast, only 3 out of 10 older women receive income from retirement savings plans or employer pensions and individual savings are at an all time low. Women surveyed in WISER’s National Retirement Survey (2005) reported they have little or no money left after paying their bills to save for retirement.

What does the pay gap mean for women’s retirement income security?

The number of women in the workforce has increased significantly over the last 25 years; however, women’s lower earnings leave them with fewer retirement resources then men.

Nearly half of women work in low-paying jobs without retirement plans or 401(k)s.

In addition to receiving lower pay, a woman today can expect to live three years longer than a man. This longer life-expectancy means that women need their money to last longer than a man does. The logical approach to this problem is for women to begin saving earlier. Unfortunately, at every age and education level, women earn less than their male counterparts.1 Even with a college degree, working women earn less than their male counterparts and this pay gap exacts a steep price. One study found that the typical working woman with a college degree will make about $500,000 less in wages over her lifetime than an equivalent male—an amount that could add up to a comfortable retirement nest egg.2

How else do women get short-changed by the retirement system?

Employment and earning patterns:
If a woman works full time, has higher earnings and her employer offers a retirement plan, she is as likely as a man to participate in that plan. However, women workers are concentrated in low-wage, service, part-time, non-union, and small firm jobs where pensions and retirement saving opportunities are less likely to be offered.

Today, 56 percent of working women earn less than $30,000 a year and only 7 percent earn more than $75,000.3 In contrast, only 39 percent of men earn below $30,000 and more than twice as many men, 18 percent, earn above $75,000. Part of the wage gap can be explained by differences in education, experience, or time spent in the workforce. But a significant portion of the gap cannot be explained by any of these factors, and may simply be the result of wage discrimination.4

Caregiving:
Some of the wage discrepancy is due to women’s diverse work patterns. Women often lose the opportunity to participate in a plan because they are part-time workers or do not remain on the job long enough to qualify to be in the plan.

A poll conducted by Genworth showed that 67 percent of women respondents had provided long-term care to someone in need. Unfortunately, the nation’s retirement system does not account for the caregiving roles that women play and that can lead to smaller benefits and lower retirement income. Not only are women more likely than men to have caregiving responsibilities for family members both old and young, they often use their own assets to pay for this care.

These factors can mean severe financial problems at retirement--a time when women are most in need of income due to health and living expenses. To make ends meet some older women must continue to work or return to work at a time long past the usual retirement age. As noted by former Congresswoman Pat Schroeder, “The pay discrimination and injustice that women endure throughout their working lives comes full circle when they get older—and it strikes its cruelest blow at retirement age when women realize that after a lifetime of hard work and struggling, they are left with very little to live on.”

What Women Can Do About Pay Equity:

Protect Yourself:

• Ask questions about pensions and/or retirement savings accounts that are available to you:
  
  • Don’t wait to be surprised at retirement. Ask now what your employer offers.
  • Ask what must you do to be eligible to participate?

• Learn What You Can Do on Your Own:
  
  • Educate yourself about what types of savings vehicles are available to individuals who do not have employer-provided plans—such as an IRA.
  • Find out the facts about your basic legal rights to pensions and retirement income as a worker, as a single person, as a spouse or ex-spouse, or as a widow.

• Start Saving Now:
  
  • If possible, start early, but no matter how old you are, do start now.
  • Every paycheck, put away some money specifically for retirement and leave it there. This isn’t easy; you have to put saving first

The pay gap leads to the retirement income gap. Protect yourself: learn all you can and save as much as possible. Don’t let the pay gap become the retirement income gap for you.

Pay Equity Checklist – What Individual Women Can Do!

(U.S. Department of Labor Women’s Bureau)

1. Evaluate what contributions you make to your employer, what skills you provide, and their value to your employer.

2. Consult trade journals, want ads, or the Department of Labor wage information to get a sense of the salary ranges for someone with your qualifications in a similar job.

3. Ask your supervisor and your colleagues what kind of skills and training you would need to move into a better paying job in your company.

4. Network with people outside your company to learn about other job opportunities, essential skills and training, and salaries for comparable positions.

5. Look for training, special projects, and other ways to build your skills that could lead to a better paying job.

6. Pursue job opportunities with your current employer or with other firms.

Who Receives Retirement Income?

Footnotes
[1] U.S. DoL, Bureau of Labor Statistics. (2009). Usual Weekly Earnings of Wage and Salary Workers, April 16, 2009. News Release. Available at: http://www.bls.gov/news.release/wkyeng.htm.
[2] Institute for Women’s Policy Research. (2005). Memo to John Roberts: The Gender Wage Gap Is Real. Fact Sheet #C362. Available at: http://www.iwpr.org/pdf/C362.pdf.
[3] U.S. Census Bureau, Current Population Survey, 2008. Table PINC-10 2008. Annual Social and Economic Supplement. Available at: http://pubdb3.census.gov/macro/032008/perinc/new10_003.htm.
[4] U.S. GAO-04-35. (2003). Women’s Earning: Work Patterns Partially Explain Difference Between Men’s and Women’s Earnings. Available at: http://www.gao.gov/new.items/d0435.pdf.