TIAA Analysis Measures Persistent Gender Gap In Savings

A new report from TIAA, “Income Insights: Gender Retirement Gap,” suggests the barriers women face when it comes to planning for retirement are very significant and very long-lasting.

Diane Garnick, managing director and chief income strategist at TIAA, penned the report.

“We live in an era where gender equality is increasingly becoming the norm, but we also happen to live during a time with ample access to the data and tools necessary to draw more accurate conclusions,” she suggests. “The data enables us to identify the obstacles women face during their savings and retirement phases. The tools enable us to provide the clarity necessary for resolving the problem at hand.”

According to TIAA, the data points speak for themselves: In order for two recent college graduates to have the same amount of money saved for retirement, the average man would need to save 10% of his salary, while the woman would need to save 18%. At the same time, generally speaking, TIAA finds women work for less years and receive fewer salary increases compared with men, among other issues.

“Many retirement strategies assume workers will be in the workforce for 40 years,” the TIAA report says. “The data demonstrates that neither men nor women tend to work that many years. Frequently, women take time off to have children, and then do so again later in life to care for elderly parents. These career breaks add up, resulting in women spending significantly fewer years in the workforce.”

In terms of the real data, men work an average of 38 years, while women average 29 years.

“This nine-year shortfall means that women work 75% of the years that men work,” TIAA observes. “This fact alone makes it immediately obvious that women need to save a higher percentage of their salary while they are working.”

NEXT: Work patterns have shifted 

Interestingly, TIAA finds the number of women opting to leave the workforce to care for their children is on the rise. According to the Pew Research Center, at the turn of the century, 23% of working age women considered themselves to be stay-at-home mothers. Today the number is nearly 30%.

“The largest share are married women with working husbands,” TIAA explains. “This may seem surprising given the increase in educational achievement over that period. In 1970 only 7% of this group were college graduates, compared to 25% today.”

Further complicating the picture is that despite how long women work, the gender pay gap persists. According to the U.S. Census Bureau, in the general population, women still only earn 78 cents on the dollar relative to men.

“Women classified as professionals are even worse off,” TIAA warns. “Professional women earned $996 per week in 2015, compared to professional men who earned $1,383. Stated another way, that is 72 cents on the dollar.”

TIAA goes on to observe that women live longer than men, adding yet another challenge in the form of increased spending, especially on health care. Once they reach age 65, women outlive men by 2.5 years with life expectancies of 85.5 and 83, respectively.

“Frequently, women interpret these statistics to mean they will live 2.5 years longer than their spouse, which is not generally the case,” TIAA adds. “This would only be true if the spouses were the same age. In the U.S. today the average age spread between spouses is 2.1 years.”

TIAA concludes that these problems are indeed daunting, but there is real hope of solving them with a fairly simple formula of higher contribution rates; improved employee education about retirement prep; selecting a qualified default investment alternative (QDIA) with higher levels of equity risk; or building a guaranteed lifetime income option within the retirement plan. 

A full copy of the report is available here.