The gender pay gap is a hot topic in the presidential campaign, and President Barack Obama has been hammering on it, too. Women who work full-time, year-round, made just 79 cents for every dollar paid to their male counterparts in 2014, U.S. Census Bureau data shows.
But the injustice of the gender pay gap also impacts retirement security, and the numbers are appalling, as detailed in my Reuters Money column today.
A woman who works full-time over a 40-year period loses $435,480 in lifetime income (today’s dollars) due to the wage gap, according to the National Women’s Law Center (NWLC), a nonprofit legal and advocacy group. Put another way, the typical woman needs to work 11 years longer than a man to achieve accumulated income parity.
The income gap translates directly to lower income from Social Security and pensions – since those benefits are determined by wage history – and it hampers the capacity of women to save for retirement. And since women typically live longer than men, savings often must be stretched across more years of retirement. That makes pay inequity a retirement security double whammy.
The gap shows up in data on savings. Unmarried men are more likely than unmarried women to report having saved for retirement, and 44 percent of unmarried women have less than $1,000 saved, according to the Employee Benefit Research Institute. It also shows up in poverty data. In 2014, women over age 65 were more than twice as likely as men to live in poverty in 2014, NWLC reports.
The best way to achieve retirement income security, of course, is by closing the wage gap itself. But in the meantime, government should be making policy changes to soften the blow. Modernizing Social Security is an excellent place to begin, but there are opportunities to improve with consumer protections and changes to the tax code.
Kathleen Burns Kingsbury, an expert on wealth and psychology who has written extensively about women and financial planning, suggests ways that women can take steps to blunt the impact of wage inequality on retirement. That starts with taking a proactive stance in negotiating for more pay. “Women need to close the pay gap by learning how to negotiate and talk about money,” she said.
When it comes to financial planning and managing money, it is not that women lack interest or knowledge, she notes. “Many women want to be more involved in their finances but struggle to find the time to do it. The financial literacy scores are about the same for men and women – in other words, both genders have work to do in this area. But women are more likely to admit when they don’t know something and therefore appear to have lower financial confidence than men.” For more on the literacy issue, see Harnessing the Power of the Purse: Female Investors and Global
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