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Published: Apr 05, 2022 4 min read
Illustration of a senior man in a big boat next too a senior woman in a small kayak
Agata Nowicka for Money

The gender wage gap costs women $1.6 million in potential retirement savings over the course of their careers, according to a recent report by the Center for American Progress (CAP), a progressive think tank.

Throughout the course of a 40-year career, a full-time working woman misses out on $417,400 of potential earnings due to the fact that women are paid less than men. According to the latest government data, a woman working full-time earns about 83 cents for every dollar that men earn.

If 100% of those lost earnings had been invested throughout the course of a woman's career, she could earn more than $1 million in retirement savings, assuming an annual return of 6%. That would result in a retirement income of $65,000 a year, not including other savings earmarked for retirement, according to CAP.

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But even narrowing the gap by a fraction would make a difference. CAP found that investing just 20% of lost wages could generate $323,000. And investing 50% of those losses could earn more than $807,000.

The gender wage gap contributes to lower Social Security benefits, putting a further dent in women's retirement security. Social Security benefits are based on a person's earnings in their 35 highest-earning years, leading the average woman to receive less than her male counterpart. According to the latest data from the Social Security Administration, the average annual benefits in 2019 for men and women ages 65 and older were $17,374 and $13,505, respectively. That’s a 22% gap.

Moreover, women tend to live longer than men. That can mean women have a longer time to go through a smaller nest egg. And health care costs, a major aspect of retirement income planning, may be higher for women. According to the latest data from Fidelity Investments, a single 65-year-old female is projected to spend $157,000 in lifetime health care costs, while her male counterpart is projected to pay $143,000.

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Race and the gender wage gap

Women of color face an even starker pay gap with white male workers. CAP’s report indicates that Black women miss out on $976,800 in potential earnings because of the gender wage gap. For Hispanic women, that figure is $1,156,440.

The CAP report notes that had 100% of the lost earnings due to the wage gap been invested throughout a 40-year career, Black and Hispanic women would accumulate around $3.8 million and $4.5 million, respectively.

Systemic inequities require solutions on a societal level. On an individual level, workers can do their best with what they have. Tax advantaged accounts like IRAs and workplace benefits like 401(k)s can help you invest in your retirement while enjoying some tax breaks. And if you're asking for a raise, this script can help.

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