When women earn less than men in their working years, it has implications in their latter years. The gendered salary gap becomes a retirement savings gap, a study found. Led by Nationwide Advisory Solutions, researchers concluded that on average, only about 62% of American women investors have a financial plan to keep them covered post-retirement. When it comes to male investors, at least 76% will have enough funds for survival through their retirement years.
Men don’t feel the pinch from lack of funds as much as women may for a number of reasons. First, women live longer than men — the World Health Organization estimates that women live at least six to eight years more than men — implying that women face the need to draw from their savings and pensions six years more than men.
Second, because they live longer women tend to incur greater healthcare costs. An annual analysis by an investment firm, Fidelity Investments, estimated that an American woman who is retiring at 65 in 2019 will most likely pay around $150,000 in healthcare costs throughout retirement, while the number drops to $135,000 for a man, CNBC reported.
Third, in taking time off after marriage or to care for children, American women end up losing at least $16,000 a year in savings compared to men, per CNBC. The gap either gets smaller or stays once women make an attempt to return to work because they either lose out on promotions or join at a salary less than what they had left with.
Women are also much likelier to work part-time than men and this proportion is higher among mothers. This also plays a major role in perpetuating the pay and pension gap because women in part-time jobs tend to get fewer opportunities to rise the ranks and are subjected to low hourly wages. And this has implications on their pensions since lower the salary, lower the amount of pension.
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“We’re in an industry that is inherently addressing the issues of men,” said Kristi Rodriguez, leader of the Nationwide Retirement Institute at Columbus, Ohio, that conducted the current study, told CNBC. “We have to instill confidence in female investors.”
In India, too, the scenario is no different. In the past year, the gender pay gap has closed by only by 1% — from earning 20% less than men, women now earn 19% less — according to a report by Economic Times.
“The narrowing of the gender pay gap by just 1% is not just a cause for concern, but a reminder to genuinely introspect if we are doing enough,” Abhijeet Mukherjee, chief executive officer of Monster.com, APAC & Gulf, told Economic Times. “It becomes pivotal to galvanize forces across corporates and industries to work towards gender pay parity.”
However, along with working towards gender pay parity, the need of the hour is also to make women financially aware; Indian women often aren’t managing their own finances. From a 2014 survey titled “Financial Literacy Around the World,” by financial services company Standard & Poor, it was found that while there is a 5-percentage point gap in financial literacy among men and women worldwide, in India, the gap was eight points.
“The lag is worrisome,” the article stated. To be financially literate would be to “have enough knowledge and awareness to be able to make sound financial decisions.” However, from various reports mentioned in the article, it is clear that factors such as lack of income, considering their income as “spare money for luxuries such as entertainment and travel; and lack of confidence when making financial choices and decisions,” are barriers in the way of women’s financial literacy.
Therefore, while gender pay parity might give women the same amount of money as men for retirement, like Rodriguez and Mukherjee mention, financial literacy will make it last through their additional years.
