Why women need to save more than men

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Men and women may not be on equal footing when it comes to investing for the future. On average, women work fewer years and earn less than men, but they also tend to live longer.Footnote 1 Therefore, women must focus on the concerns that are unique to them when planning for retirement.

Women don't invest differently…

Unfortunately, some negative stereotypes still exist about a woman's ability to manage money, which may cause some women to feel they shouldn't make their own investment choices. Some leave the decision making to their husbands, which can result in their being ill-equipped to handle their finances if they outlive their spouses.
Despite the stereotypes, studies show that the majority of married women actively participate or take the leading role in managing family finances.
Educating themselves about investments and long-term planning can help women feel more comfortable with riskier — yet potentially more rewarding — investments. As more women enter the field of financial advising and planning, female investors may also be more inclined to seek advice from other women.

…But there are real obstacles to overcome

The median earnings of working-age women who worked full-time, year-round were $42,692 in 2019, compared to $52,364 for men.Footnote 2 Because they earn less, women often are unable to invest as much as men. However, 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 clock fewer total work hours. On average, 42% of women said they reduced work hours to care for a child of family member, compared to only 28% of men.Footnote 2
This may mean that women qualify for 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. That means they must provide for more years in retirement than their male counterparts.
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.Footnote 2
Finally, because women tend to live longer than men, not only can they expect to spend more years in retirement, but they must consider the fact that a couple's retirement savings may be diminished by health care costs for the spouse who dies first.
On average, women…
  • Live longer than menFootnote 1
  • Receive lower pension and Social Security benefits in retirementFootnote 1
  • Earn less than menFootnote 2
  • Spend more time caring for family membersFootnote 2

Working toward a solution

While there is clearly a gender gap in earnings, data from the Bureau of Labor Statistics has shown improvements in women's earnings. Higher earnings for women could mean the potential for more investments.
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 may have to invest more.
There are a number of steps women can follow when planning for a comfortable retirement:
  • Carefully consider how much risk you are willing to take in exchange for the potential to earn higher returns. Historically, equity investments have provided higher returns over the long term than less risky investments like money markets and short-term bonds, although past performance is no guarantee of future results.
  • Obtain information about the retirement benefits that are available through your employer, and actively participate in any plans offered.
  • Seek education about the investment vehicles that can help you reach your retirement goals. An investment professional is an excellent source of information and guidance to 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.
  • Most important, women need to recognize the unique challenges they face and start saving and investing as early as possible to overcome them.

Footnote 1 Centers for Disease Control and Prevention, Mortality in the United States, 2020, NCHS Data Brief No. 427, December 2021.

Footnote 2 Morningstar, 100 Must-Know Statistics About Women and Retirement, March 3, 2021.

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The material was authored by a third party, DST Retirement Solutions, LLC, an SS&C company ("SS&C"), not affiliated with Merrill or any of its affiliates and is for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.

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