How the Gender Pay Gap Impacts Women’s Retirement

How the Gender Pay Gap Impacts Women’s Retirement article image.

Setting aside adequate retirement savings is a struggle for around half of all Americans, according to Boston College's Center for Retirement Research. But preparing financially for the golden years remains more challenging for women, even more so thanks to the pandemic.

While the well-documented pay gap between men and women has decreased in past decades, it has yet to close. That income disparity, along with other historical and social factors, have left women with smaller retirement accounts. A 2020 report by the National Institute on Retirement Security (NIRS) found that older women receive around 80% of the retirement income of their male counterparts.

Why the Gender Retirement Gap Exists, and Persists

While women in the U.S. have achieved fair access to credit, a combination of historical, social and financial factors conspire to leave them less financially prepared for retirement. These include:

  • Pay gap: Despite some progress and numerous campaigns for equal pay, women still typically earn less over their entire careers than men. According to 2020 data from the Bureau of Labor Statistics, women overall earn 82 cents for every dollar a man earns annually. The rates are much worse for women of color, however. When compared with white men in America, Latina women earn just 55 cents on the dollar, and Black women earn 63 cents on the dollar. This pay gap contributes to the retirement gap because less income can make it harder to save for the future.
  • Childbearing or caregiving: Maternity leave is often unpaid in the U.S. since only some employers offer it. Some women also leave the workforce altogether to raise children. While this can save on child care costs, these women sacrifice income and may find it harder to reenter the job market after time away. Women are also often expected to step away from work to be a caregiver for ailing parents or spouses: The NIRS report says that around 60% of caregivers—whether of children, ailing parents or spouses—are women. This chips away at their lifetime earnings, savings and, ultimately, their retirement security, according to the report.
  • Divorce: Divorce can cause a cascade of issues that impact women's retirement preparedness, though the damage can vary based on the divorce's timing and division of assets. For example, a woman who's been counting on financial support from her spouse in retirement may suddenly have to start saving from scratch. Going from a dual-income household to a single-income household can make it harder to set aside savings.
  • COVID-19 pandemic: One of the many casualties of the pandemic was financial stability, especially for women. This is partly due to layoffs and a lack of child care that resulted in many women leaving the workforce, according to the Department of Labor (DOL). This exodus dropped the rate of women's labor force participation to 55.8% by February 2021, the DOL found—the lowest since 1987. Another impact was a decrease in retirement savings and exacerbation of the gender retirement gap, according to an analysis by 401(k) company LT Trust. Upon reviewing 401(k) accounts of 59,000 U.S. workers across the nation in 2021, LT Trust found that despite stock market growth, women's retirement savings dipped from 70 cents for every dollar saved by men to 68 cents on the dollar.
  • Longer lifespans: Women typically live longer than men, the NIRS report notes, leaving them to pay for more years of retirement with less savings. Women also usually spend more years being single in retirement, the report adds, potentially increasing the financial burden.

How to Increase Your Retirement Savings

Financial firm Fidelity recommends saving 15% of your annual income starting at age 25 for retirement, but that's not possible for everyone. The brokerage also uses a simple rule of thumb to determine how much you should have saved for retirement:

How Much You Should Have Saved by Age...
301 times your annual salary
403 times your annual salary
506 times your annual salary
608 times your annual salary
6710 times your annual salary


If you're behind these benchmarks and need to boost your retirement account balances, here are some options:

  • Take advantage of workplace plans. One of the best ways to save for retirement is to utilize the tax advantages of workplace retirement plans since they're tax-advantaged. If your employer matches your contributions, not jumping on this free opportunity to accelerate your savings is leaving money on the table. If you don't have a workplace retirement option like a 401(k) or pension, open an IRA on your own.
  • Utilize catch-up contribution options. While the IRS limits how much can be invested in tax-advantaged retirement accounts annually, it permits more for Americans over 50 so they can catch up as they near retirement. Find out how much you can contribute and try to max it out.
  • Be flexible. If you're well behind your goal for retirement savings, you may need to make some less-than-desirable modifications. For example, consider working a few years longer than you'd originally planned, or retiring from full-time work but working part time for a few years. Or perhaps it may be necessary to get on a tighter budget and cut back on spending to divert more money to retirement savings.
  • Hire an expert. If you're behind on retirement savings and unsure how to catch up, meet with a certified financial planner or investment advisor. A savvy professional can assess your current retirement savings, calculate how much you still need and advise on strategies to reach your goals.

Advocate for Yourself and Others

If you're still employed, don't be afraid to ask for a raise or other financial benefits. Beyond personal measures, you can help address root causes of the retirement gap by supporting initiatives for paid family leave and equal pay.

If you want to create change in your workplace, you could suggest the employer have more salary transparency and conduct pay audits to uncover unconscious bias. You can also encourage your employers to not ask job applicants about previous salaries, since research has found not requiring this information decreases the wage gap. Another strategy is to partake in career mentoring programs, which can create more opportunities for women, especially in minority groups, according to the Society for Human Resource Management.

While it's not always easy to build and maintain good credit, especially in the face of financial or personal struggles, it's wise to make the effort. It helps you to qualify for loans, credit cards and other financial products with lower interest rates and fees, and it's considered when applying for jobs, utilities and rental properties. If your credit needs some help, try Experian Boost®ø, a free tool that gives you credit for payments that don't normally contribute toward your score.