Skip to footer

How gender pay gap trickles into retirement savings

Many Americans struggle to save for retirement, but the gender wage gap makes the prospects for women even more dire: A woman must save $1.25 for every $1 a man does to build an equivalent nest egg, a new study shows.

|
Jessica Hill/AP
Fans stand behind a large sign for equal pay for the women's soccer team during an international friendly soccer match between the United States and Colombia at Pratt & Whitney Stadium at Rentschler Field in East Hartford, Conn.

Many Americans struggle to save for retirement, but the gender wage gap makes the prospects for women even more dire: The average woman must save $1.25 for every $1 a man invests to build an equivalent nest egg, a new study shows.

For every $1 men earned in 2015, women, on average, made 80 cents, up from 77.5 cents in 2007, according to an analysis of the latest data available from the U.S. Census Bureau. While pay parity remains elusive, the gap is closing more in some states than in others, which translates into a smaller shortfall in retirement savings.

For example, in New York, the state with the narrowest wage gap, women must sock away $1.13 for every $1 a man puts in a 401(k), traditional individual retirement account, Roth IRA or other investment plan to reach the same amount. In Oklahoma — the state where women’s wages lost the most ground since 2007 — women would need to set aside $1.37 for every $1 a man saves to catch up, the analysis by NerdWallet found.

Both men and women struggle to save for retirement. The National Retirement Risk Index suggests roughly half of American families aren’t saving enough to maintain their standard of living once they’ve retired. But the wage gap can make the challenge more pronounced for women, who live, on average, five years longer than men.

So, what’s behind the wage gap? Research suggests the issue isn’t that a woman working a particular job makes less than her male colleague; rather, it’s that the odds are greater that he will rise to upper management and earn more.

As well, a 2014 Harvard study suggests women are far more likely to take career breaks for child and elder care, which limits the number of women working in more time-consuming jobs with little flexibility for family needs.

A checklist for saving for retirement

To help keep the wage gap from expanding into an even larger retirement shortfall, try these suggestions to maximize savings:

  • Get the full match on your workplace retirement account. Employers often will match — up to a limited amount — the cash you contribute to a workplace retirement account, such as a 401(k) or 403(b). Your contributions are made pretax, directly from your paycheck.
  • Set up a Roth or traditional IRA. IRAs also offer tax benefits to savers who qualify. If you are married and file taxes jointly, a non-working spouse can open and contribute to an IRA based on the working spouse’s income. A Roth IRA calculator can show you how much you can contribute.
  • Use a taxable account. After maxing out tax-advantaged retirement savings accounts, you can invest further in the stock market’s long-term earning power. While there is always some degree of uncertainty when it comes to stocks, taking an appropriate risk can help the dollars you save work harder.

What’s the gap in your state?

Here are the states where women’s incomes average the most — or fewest — cents on the dollar compared with men, and where the pay gap saw the most — or least — improvement. If your state isn’t on one of these lists, you can find it here.

10 states with the smallest wage gaps in 2015

  1.     New York (Women made 88.7 cents for each $1 men earned)
  2.     Delaware (88.5 cents)
  3.     Florida (86.6 cents)
  4.     North Carolina (85.9 cents)
  5.     Rhode Island (85.8 cents)
  6.     California (85.7 cents)
  7.     New Mexico (84.6 cents)
  8.     Hawaii (84.1 cents)
  9.     Vermont (83.8 cents)
  10.     Nevada (83.7 cents)

10 states with the largest wage gaps in 2015

  1.     Wyoming (Women made 64.4 cents for each $1 men earned)
  2.     Louisiana (68 cents)
  3.     West Virginia (70.6 cents)
  4.     Utah (71.1 cents)
  5.     North Dakota (71.1 cents)
  6.     Montana (72.5 cents)
  7.     Oklahoma (73.2 cents)
  8.     Idaho (73.5 cents)
  9.     Michigan (74.3 cents)
  10.     Ohio  (74.7 cents)

10 states where the wage gap improved the most, 2007-2015

  1.     Rhode Island: (Wage gap shrunk 10.96%)
  2.     Delaware: (10.19%)
  3.     New Hampshire: (9.87%)
  4.     Kentucky: (9.28%)
  5.     Connecticut: (9.00%)
  6.     Florida: (8.41%)
  7.     Illinois: (7.96%)
  8.     South Carolina: (7.83%)
  9.     New York: (7.76%)
  10.    New Mexico: (7.55%)

10 states where the wage gap improved the least, 2007-2015

  1.     Oklahoma (Wage gap grew 5.57%)
  2.     Utah (grew 1.35%)
  3.     Vermont (grew 0.40%)
  4.     Texas (no change)
  5.     Idaho (Wage gap shrunk 0.45%)
  6.     Ohio (shrunk 0.99%)
  7.     Nebraska (shrunk 1.21%)
  8.     Georgia (shrunk 1.28%)
  9.     Virginia (shrunk 1.37%)
  10.     Colorado (shrunk 1.37%)

Kevin Voigt is a staff writer at NerdWallet, a personal finance website. Email: kevin@nerdwallet.com. Twitter: @kevinvoigt. Jonathan Todd is a data analyst at NerdWallet. Email: jonathan.todd@nerdwallet.com.

This story originally appeared on NerdWallet.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to How gender pay gap trickles into retirement savings
Read this article in
https://www.csmonitor.com/Business/Saving-Money/2017/0119/How-gender-pay-gap-trickles-into-retirement-savings
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe