The financial hurdles women confront to attain financial security in retirement can be colossal, as a Senate Special Committee on Aging hearing last week validated bluntly.
The hearing entitled, “Women and Retirement: Unique Challenges and Opportunities to Pave a Brighter Future” focused on the barriers that women face in planning for a financially secure retirement and how the COVID-19 pandemic has exacerbated this fragility.
Sen. Susan Collins (R-Maine), chairman of the aging committee and subcommittee member Sen. Bob Casey (D-Pa.), explored the findings of a new Government Accountability Office (GAO) report that they requested, which details how factors such as pay inequality, time spent caregiving and access to Social Security benefits and how the timing of filing for those benefits can dramatically impact women’s retirement security.
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If you’ve got the time, consider watching the video of the hearing. Mind you, it’s a far cry from the “The Real Housewives of The Potomac.”
The hearing divulged the real, real life about gender inequality—the decidedly non-frothy facts about women’s higher risk for falling into poverty than their male counterparts. And it’s significant.
According to the nonpartisan Center for Retirement Research, on average, women face a larger retirement savings gap than men and experience higher poverty rates at older ages.
The hearing also focused on recommended steps that can be taken to address the challenges women face including financial education initiatives, proposed legislation, potential state efforts and federal grants to stimulate financial education as well as public-private initiatives to boost high-school and employer-based education.
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Collins, too, is still beating herself up for cashing out her retirement-plan savings to buy a car in her mid-30s, a personal story she also shared in a hearing last year.
She bemoaned the financial decision she made when she left the Hill as a staffer with more than 10 years of retirement contributions and withdrew all of the money in order to buy a car. She admitted that she simply didn’t understand the future financial implications of that bad choice for her ultimate pension.
Top concerns for older women
The committee heard (and maybe you will, too, if you watch that video) testimony from Comptroller General Gene L. Dodaro, the head of the GAO, who discussed the considerable damage the COVID-19 pandemic has caused to the economy, and the retirement security of future retirees and drills down on the findings of the July 2020 GAO report.
The GAO researchers interviewed 190 women in focus groups pre-pandemic, who described anxiety about retirement security. The majority were 70 to 80 years-old, and 19 were over 80. Among these women, 129 were white, 42 were African-American, five were Hispanic or Latina, three were Asian, two were American Indian or Alaska Native, six were other or mixed races, and three did not report their race.
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Their top five concerns about retirement: inflation increasing cost of goods; reduced Social Security or Medicare benefits; cognitive decline; medical costs; incorrectly estimating future expenses and ability to pay.
And while future expenses were troubling, health care costs was the big scare. The women raised alarms about being able to afford procedures or prescription drugs, which may not be covered or fully covered by their health insurance. Women shared stories of skipping dental exams or vaccinations because they could not afford them.
Importantly, they noted they lacked personal finance education and wish they had it earlier in their lives. They felt confused and misinformed about savings, investing, enrolling in Medicare, and claiming Social Security.
In fact, Social Security and Medicare dominated the discussions, and the fear of losing benefits was the most talked about concern among the women, according to Dodaro.
There were noteworthy racial gaps. “About 23 percent of households with white respondents and 40 percent of those with African-American respondents reported low retirement confidence, a statistically significant difference,” according to the researchers.
Burden of caregiving
There’s lots of attention paid to the wage gap between men and women and the painful repercussions that chasm has for women’s financial futures and this hearing and the GAO report are clear on this. But what was interesting to me is that the report teased out the stunning blow that caregiving, often for a spouse, delivers to older women.
This is an area that is almost taboo to discuss. It’s what many women do sometimes by choice, often by default, and it’s hard to get a bead on precisely the toll it ultimately takes on their own lives by many measurements.
The report found that in 2019, on average, married women who provided care for a spouse had 15% less in Social Security income than married women who were not spousal caregivers.
They also found that spousal caregivers nearing retirement worked fewer hours and had less in financial assets than married individuals of the same age who did not provide care to a spouse.
Meantime, women who were spousal caregivers toward the end of their careers said their role as caregivers factored into their decision to take time off work or retire early.
What could help women reach financial well-being in retirement
Women typically fall behind men when it comes to financial literacy and saving for retirement — and they’re right to be worried about it, as I wrote in this column, How women can do a better job of preparing for retirement.
This is deeply concerning to me. There are, however, actions women can take to gain some control beyond the save more and negotiate harder for salary motivational mantra that experts, even me, urge women to do. Yes, that is all well and good, but there are other big picture and somewhat emotional shifts to consider.
“Women are particularly likely to focus on helping others but should take care not to give too much money to their children, said Anna Rappaport, chair of the Society of Actuaries Aging and Retirement Strategic Research Program, and author of the report Women and Post-Retirement Risks. “It is good to help family members, but not if that puts oneself into a difficult situation.”
She also encouraged women to take the time to understand family finances. Women must plan to manage their money solo one day. That’s hard to fathom those happily partnered up, but let’s face stark reality.
“Women should not forget about the need to plan for widowhood and the possible contingency of divorce in their planning,” Rappaport said. “Society of Actuaries research indicated that divorce after retirement is one of the shocks that women are not able to recover well from. A whopping 75% of women over age 85 are widowed and only 13% are married.”
Finally, plan for health care later in life. No one wants to imagine themselves ill and frail, but most of us aren’t super woman to the end of our days. I know this first hand as a part-time caregiver for my 91-year old mom, who has dementia. Dad, who had Alzheimer’s disease, died in 2008.
“A plan to manage long-term care is particularly important for women,” Rappaport said. “Women on average need long-term care for a longer period than men, and they are less likely to have a spouse to help them. Women often care for other family members and then they are alone. Women at age 65 have an average expected period of disability of 2.83 years compared to 1.50 years for men, and are less likely to have a family caregiver.”
A footnote: I will be a panelist in this week’s WISER’s Annual Symposium on Financial Solutions for Women, “Moving Forward: Building, Expanding and Strengthening Women’s Retirement Security.” This virtual symposium is hosted by the Women’s Institute for a Secure Retirement and sponsored in part by Dimensional Fund Advisors. Experts will discuss public policy options and educational initiatives that can help women and their families better secure their long-term financial future.
The takeaway from these events and research: there’s a convincing need for more public policy initiatives to help women save for retirement.
Kerry Hannon is an expert and strategist on work and jobs, entrepreneurship, personal finance and retirement. She is the author of more than a dozen books, including Great Pajama Jobs: Your Complete Guide to Working From Home, Never Too Old To Get Rich: The Entrepreneurs Guide To Starting a Business Mid-Life, Great Jobs for Everyone 50+, and Money Confidence. Follow her on Twitter @kerryhannon.
