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October 22, 2007
Women Struggling to Save Enough for Retirement
A new report by the United States Government Accountability Office (GAO) finds that while there is no simple answer as to why women are making less money and saving less for retirement than men, there are a number of contributing factors. GAO conducted its research to find out how women may fare given future reforms to Social Security and pensions.

GAO noted that women age 65 and over will account for a growing segment of the population in coming decades and that despite women's increased workforce participation over the past several years, elderly women have "persistently high" rates of poverty. Among other things, GAO examined how women's retirement income compared with men's and the reasons for differences.

Their research found that fewer women have income from major retirement sources--and less income from these sources--than men. For example, women's median Social Security income is 70 percent of men's, and fewer women than men have pensions.

Women also spend fewer years in the workforce than men and are more likely to work part-time. This is due in part to life events such as changes in marital status, and workforce participation interruptions resulting from care giving responsibilities (for children or elderly relatives). These events can "significantly reduce the amount of pension income and Social Security benefits women receive --and leave women with fewer financial resources at retirement than men" according to the report.

For example, Social Security divorced spousal benefits are available only if the marriage lasted at least 10 years, GAO explains in its report. And pension benefits are available to a divorced spouse only under certain circumstances. Meanwhile, when women are the primary family caregiver for children or elderly relatives, it can reduce their career earnings on which retirement income is based, the report notes.

GAO projects that some Social Security changes that would compensate for low earnings or workforce participation interruptions would "tend to increase benefits for beneficiaries overall, and particularly those in lower income quintiles." Social Security changes that focus on "shifts in family structure, such as increases in two-earner couples and increased incidence of divorce, also tend to increase the benefits of groups targeted by the change," according to GAO.

Meanwhile, GAO projects that proposed pension changes that take into account "the changing labor force and norms of employer-provided retirement plans" could help women to increase their retirement income. One such proposed change is for decreased vesting requirements, "which could provide additional pension income to those with intermittent workforce participation who would not qualify for pension benefits under a longer vesting schedule," according to GAO.

While the report, "Women Face Challenges in Ensuring Financial Security in Retirement," identified life events that can interrupt or limit women's participation in the workforce as a significant factor to explain why women's retirement incomes aren't as good as men's, GAO noted that in its previous research, it has determined that even after accounting for "behavioral differences such as education or labor force participation, women still earn less than men."


  • U.S. Government Accountability Office

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