3 Reasons Women Need More Money for Retirement

Quick Answer

Women need to save more for retirement because they have a longer average life expectancy and contend with challenges related to the gender pay gap, financial hardships linked to relationship changes and higher rates of caregiving.

An elderly woman drinks from a cup while sitting on a bench next to her dog with trees in the background.

On average, women live about 8% longer than men, which can mean more time in retirement. But the gender pay gap and higher rates of caregiving can present hurdles to robust retirement saving. In fact, from age 65 and up, women have 58% less saved for retirement than men on average (a median $204,304 versus $491,621), data from Vanguard shows.

All this adds up to financial insecurity in retirement for many women. Here's a rundown of why women need to save more for retirement, plus tips on upping your retirement savings now.

1. The Gender Pay Gap

Women earned 83 cents for every dollar a man earned in 2021, according to the U.S. Bureau of Labor Statistics. This gender pay gap can have a staggering impact on lifetime earning potential and on retirement savings for women. Women miss out on between $400,000 and $1.2 million in lifelong earnings due to the gender pay gap, according to calculations from the Center for American Progress.

And if 100% of the lifelong earnings lost to the pay gap were invested, a woman working full time over a 40-year career could accumulate $1.6 million in retirement savings, assuming a 6% rate of return.

2. Life Expectancy

Everyone hopes for a long life. But if you live longer than your retirement planning took into account, you can find yourself in a financially burdensome situation. In retirement investing, the term "longevity risk" refers to the risk that a retiree will outlive their savings.

The average life expectancy for women in the United States is 81 years, compared with 76 for men, according to data from the CDC. And for women who are partnered with men, this difference in average lifespan can mean women spend around 10 years widowed. Of course, it's not a pleasant thought, but it's worth taking into consideration as you crunch the numbers and come up with a retirement savings goal.

3. Higher Caregiver Rates

A caregiver is someone who provides daily or regular support to children, adults or someone with chronic illness or a disability. Two out of every three caregivers in the United States are women, according to data from the CDC. Caregivers in this context differ from formal caregivers, who are paid care providers such as nurses or day care providers.

Caregiving comes with increased financial strain and other monetary consequences. While many informal caregivers also hold paid jobs—61% of unpaid caregivers also work a paid job, according to AARP data—caregivers of older adults face higher rates of economic insecurity in retirement.

Caregiving is associated with periods of exiting the workforce, which means less access to workplace retirement saving plans and loss of income. Informal caregivers ages 50 and over who exited the workforce to care for a parent lost an average of $303,880 in income and benefits over the span of their life, an analysis of data from the University of Michigan Health and Retirement Study found.

How to Save More for Retirement

Women can implement a few tried and true strategies to contend with investing challenges and boost their retirement savings:

  • Try saving a little more. Women in the for-profit sector saved an average 10.5% of their salary, whereas men saved an average 11.2%, data from Vanguard shows. It may not sound like much, but experts suggest that upping your contributions by even 1% per year can make a major difference on how much you have saved by retirement age.
  • Avoid debt. Carrying high-interest debt can be a big burden, and it sucks up money in interest that you could be investing toward retirement. Pay down any high-interest debt you're carrying ASAP, and try to avoid carrying balances by sticking to a budget.

Start Retirement Planning Now

The first step to preparing for a long-term investing goal is to come up with a clear goal number. Some experts suggest aiming for around $1 million by retirement, while others suggest aiming for 10 to 12 times your pre-retirement income. For someone earning $60,000 a year, that would mean aiming to save $600,000 to $720,000 by retirement.

But your goal number comes down to personal variables, such as what you plan to do in retirement. Consider consulting with a financial advisor to come up with a retirement plan that works for you.