The Gender Pay Gap Haunts Women in Retirement Too

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.

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.

"When you put together all these factors, it's not a surprise that women are left with greater economic insecurity in retirement than men," said Fatima Goss Graves, senior vice president of NWLC.

Fixing Current Policy

The gap shows up in data on savings. Unmarried men are more likely than unmarried women to report having saved for retirement, and 44% 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 are more than twice as likely as men to live in poverty in 2014, NWLC reports.

Paying women less than men for the same work has been illegal since 1963. Seven years ago, Obama signed the Lilly Ledbetter Fair Pay Act, which makes it easier for workers to challenge pay inequality. He announced last week that employers with more than 100 workers will be required to start reporting compensation data by gender to the federal government.

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. The average benefit in 2014 for women over age 65 was $14,234 a year, compared with $18,113 for men, according to Social Security Administration data. Sensible proposals have been offered that would improve benefits for women, such as beefing up survivor benefits, providing benefit credits for caregivers and increasing benefits at age 85.

Requiring employers to open up workplace retirement saving plans to part-time workers also could help. Another good idea: improve the current Saver's Credit, which is a nonrefundable tax credit up to $1,000 for low-income workers ($2,000 for couples) who contribute to workplace plans or IRAs. Many policy experts would like to see the credit made refundable - currently it is not available to workers who do not have a federal income tax liability.

Being Proactive

But what if you would rather not hold your breath and wait for an overhaul of federal policy?

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."

Women who are working with financial advisers - or want to - should consider working with a "female-friendly adviser," she said. "Some women are hesitant to take on investment risk and this can work against them when saving for retirement. But if you have an adviser you trust, you can learn how to take calculated risks and make investments that will help you reach retirement goals."