December 18, 2023

Retirement saving should be a priority for women, U.S. study says

Writing for Yahoo! Finance, Emily Oster reports that despite the fact that women generally live longer than men, they don’t tend to put a priority on retirement saving.

“Women generally live longer than men. This means women need to prepare for their financial future and conserve their savings for a longer amount of time. And yet, there is a 30 per cent gender gap in retirement savings—meaning for every dollar saved by men, women save 70 cents,” she writes.

The article says that means that women are starting the retirement savings race in second place, but things are worse for moms.

Citing new research from TIAA in the U.S., Oster notes that “while there are many drivers behind the gender retirement gap, ranging from women receiving lower earnings than men to differences in expectations about payment for childcare, there are easy and accessible ways to get the retirement income you deserve.”

While more than half of women focus on childcare costs, just 33 per cent see retirement saving as a priority, the article reports.

For moms, there is a double whammy, Oster writes.

“Leaving the workforce when children are young does not only result in a loss of income, it also means a loss of retirement savings and potentially lowers earning potential later, even if you do eventually return to the workforce. That doesn’t necessarily mean it isn’t the right choice for your family, but if the decision is purely financial, there is more to factor than just immediate income loss,” she explains.

We can add another consequence – you may not be able to afford to contribute to a retirement savings program while you are off work on a parental leave, earning less.

Oster uses this example to illustrate the impact of time away from paid employment:

“Consider a 30-year-old making $60,000 a year who manages to save just three per cent of their income, or $1,800 a year. Taking two years off of work at this stage results in over $38,000 less in retirement savings by age 65 when compounded with seven per cent interest. If that same person took five years off of work, the difference in savings would be nearly $100,000,” she explains.

There’s another problem for American women, Oster writes, and that’s the fact that many of them are not saving much for retirement.

“Only 26 per cent of women are saving for retirement and are comfortable with the amount they are saving; 47 per cent have no retirement savings at all; and the remaining 27 per cent are saving but not to the level that they want,” the article reports.

Oster cites the power of compound investment growth as a reason to start saving early in life, even if you start small.

“It’s important to specify what women with no retirement savings at all could be missing out on. If someone who is currently 30 years old put just $20 a month into a retirement savings account at seven per cent interest, they would have approximately $34,000 in savings by age 65. This $20 a month is the equivalent of five lattes or one streaming service subscription,” she writes.

Oster concludes by noting that it is never to late to start saving for retirement, urging readers to track earnings and spending in order to free up money for saving, and to open a retirement savings account now, and start small, ramping up when possible.

Did you know that one of the founding purposes of the Saskatchewan Pension Plan was to provide a way for folks who didn’t have pension plans at work, or who didn’t work, to save for retirement? SPP still delivers on that purpose.

If you don’t have a plan through work, and are relying on yourself to save for retirement, why not enlist the expertise of SPP? This do it yourself pension plan will invest your hard-saved dollars in a low-cost, professionally managed pooled fund. When it’s time to collect income, SPP’s options include the Variable Benefit (now available to all Canadians) or the possibility of a lifetime annuity.

Check out SPP today!

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Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.

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