According to the Women’s Institute for a Secure Retirement, women need to save more for retirement to make up for the fact that women still earn less than men during their working years and at the same time live longer than men.
The Longevity Risk
Statistics show a woman turning age 65 can expect to live 21 a further 21 years. This is three years more than the life expectancy for a man at 65. Living longer puts women at greater financial risk due to inflation and unexpected long-term care costs that aren’t covered by insurance.
For married women, outliving your spouse means you lose half of your household Social Security income if you’re both receiving benefits at the time of their death. And, as the surviving spouse of a FERS participant, your benefit will be reduced to either 50% or 25% of your deceased spouse’s base annuity depending on the election chosen at retirement. Of course, if your spouse elected “no annuity at all” there will be no survivor benefit.
The Gender Pay Gap
Though the government has made some strides in closing the gender gap when it comes to equal pay, there’s still work to do. According to the latest OPM statistics, women in the federal workforce make about 94 cents for every dollar that men make. However, women tend to be overrepresented in federal jobs with lower salaries and underrepresented in positions with higher salaries. In other words, women are employed at lower grade levels considerably more than men working for the federal government.
“You’re also taking a hit on your FERS pension (annuity) because it’s based on your High-3 salary.”
The Motherhood Penalty
In addition to earning less than men, women also tend to have fewer years of earned income as a result of career interruptions. On average, women spend nine years out of the workforce staying home to care for young children or elderly parents. Known as the “Motherhood Penalty,” it means you’re losing years of contributions to your Thrift Savings Plan (TSP) and missing out on your agency match for just as long.
You’re also taking a hit on your FERS pension (annuity) because it’s based on your High-3 salary. As a result, your lower wages and fewer years in the federal workforce will result in a smaller monthly benefit compared to your male counterparts. And when it comes to Social Security, fewer years of earned income result in a smaller monthly benefit.
Without a doubt, these issues are the main reasons women need to save more for retirement. Connect with an FRC® trained advisor who can help you build up your retirement nest egg before it’s too late.
