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The Pay Gap's Connected To The Retirement Gap!

WISER Special Report

Most people are familiar with the well known "gender wage gap," men out-earning women an average 26 cents on the dollar. But it is less well known how the lack of pay equity eventually translates into a "retirement wage gap" that helps to push up the poverty rate for older women.

In every age group, women have lower incomes than men do, but the gap is especially pronounced at retirement. No surprise, since retirement benefits are based on the accumulation of lifetime earning - women with pensions receive about half of the amount that men receive -- $4,200 annually compared to $7,800 for men. That's a retirement wage gap of 53 cents.

Reality Check

Retirement income is supposed to come from three separate sources: your Social Security benefit, a pension from work, and your individual savings. Yet today's older women do not have much income from either pensions or savings, and while women have increasingly entered the workforce over the last twenty years, their lower earnings leave them with few resources to invest. Our National Women’s Retirement Survey (1998) reported that women usually have little or no money left after paying their bills to save for retirement.

Women need to save more for retirement than men do because they live longer and they need to begin to save early because their income does not increase as much as men's. But half of all full-time working women earn less than $22,000 so it's unlikely they'll be able to save the significant amounts that the financial industry predicts are needed for retirement.

According to a USA Today Report, an amount commonly used to determine what you will need for retirement is that a 35 year old man earning $50,000 (married or single) needs only $3,000 to be on track for a comfortable retirement while a 35 year old single woman needs $35,000!

How else do women get short-changed by the retirement system?

Employment patterns

Women are concentrated in low-wage, service, part-time, non-union and small firm jobs, where pensions are less likely to be offered. Three out of five minimum wage workers are women. Women also change jobs more frequently.

Caregiving

The nation's retirement system does not account for the caregiving roles that women take on that eventually cause them to receive smaller benefits. The average woman spends 15 percent of her career out of the paid workforce caring for children and parents.

These factors eventually translate into severe financial problems at a time when women find that their health is beginning to deteriorate and they are most in need of "retirement" income. In fact, many older women find that they are often forced to continue to work long past the normal retirement age of 65 or have to return to work during "retirement" to make ends meet.

As former Representative Pat Schroeder liked to remark when speaking about pay discrimination, "the pay discrimination and injustice that women endure throughout their working lives comes full circle when they get older - and it strikes its cruelest blow at retirement age when women realize that after a life-time of hard work and struggling that they are left with very little to live on."

What Women Can Do

Ask Questions: Retirement issues are no longer just a "sleeper" issue for most Americans. So what can women do? Well, one of the key aspects of retirement planning is to start early - the financial wizards advise that when you get that first paycheck you need to start saving slowly but steadily and of course, keep those funds for retirement not for other emergencies. We all know that’s not easy and in order to save money, you have to earn money and put yourself first.

And although only half the working population has pension coverage, women especially need to get the answers to a few simple questions now, so they are not surprised when they leave their jobs or when they retire. They need to learn how to benefit from the pension system. Find out what types of plans are available and make sure that they take advantage of any employer matching funds. Learn what mutual funds offer individual retirement accounts with low administrative expenses and about the opportunities for tax breaks.

Conclusion

Finally, with all the attention that is now being given to the nation's retirement system, there is hope for the future. Women's retirement security is definitely on Washington's fast track, as both Democratic and Republican politicians are focusing on who will vote in next year's election. So make sure you stay on top of any significant reform proposals that will affect your future paycheck.

Pay Equity Checklist - What Women Can Do!

1. Evaluate what contributions you make to your employer, what skills you provide, and their value to your employer.

2. Consult trade journal, want ads, or Department of Labor wage information to get a sense of the salary ranges for someone with your qualifications in a similar job.

3. Ask your supervisor and your colleagues what kind of skills and training you would need to move into a better paying job in your company.

4. Network with people outside your company to learn about other job opportunities, essential skills and training, and salaries for comparable positions.

5. Look for training, special projects, and other ways to build your skills that could lead to a better paying job.

6. Pursue job opportunities with your current employer or with other firms.

(U.S. Department of Labor Women's Bureau: 202-219-4486)

WISER - Women's Institute for a Secure Retirement.