Shortchanged in Retirement: Continuing Challenges to Women’s Financial Future

Report published by The National Institute on Retirement Security

Executive Summary

The foundation of middle class retirement security in the U.S. rests on a “three-legged stool” composed of Social Security, a pension, and personal savings for retirement. After decades of restructuring in retirement benefits and stagnant household incomes, this three-legged stool is broken, especially for women. They cannot make ends meet on Social Security alone, yet lack sufficient personal savings to get by, and—for the majority who work in the private sector—are less likely to have an employer-sponsored defined benefit (DB) pension. Baby boomer women—the first generation to approach retirement age under these conditions—find themselves in the workforce well into retirement age and facing poverty rates close to 12 percent.

This report, which is based on the authors’ analysis of the 2012 Survey of Income and Program Participation (SIPP) data from the United States Census, examines the distinct challenges posed by the current retirement system of Social Security, pensions, and savings for working-age women, retirement-aged women, and retired women. Specifically, this report examines the labor participation rates of women approaching retirement; women’s access, eligibility, and participation in employer-sponsored retirement plans; sources of income for women aged 65 and older; and poverty rates of women aged 65 and older. We also provide an overview of proposed policy solutions that reduces women’s vulnerability to financial hardship as they age.

The key findings of this report are as follows:

  1. Labor force participation among women aged 55 to 64 climbed from 53 percent in 2000, to 59 percent in 2015, with a peak of 61 percent in 2010. Women may be working longer in order to make up for lower retirement savings over their careers and to offset investment losses from the Great Recession.
  2. While women were somewhat more likely than men to work for employers that offered retirement plans in 2012, there is a gap in eligibility that limits women’s participation in these plans. Since 2006, this gap has narrowed and now women and men have the same overall participation rates. Women’s higher rates of part-time employment and shorter job tenure may make it more difficult to meet employers’ eligibility requirements for retirement plans compared to men.
  3. The share of women working for employers that offered defined contribution (DC) only retirement plans shrank from 49 percent in 2009 to 46 percent in 2012. The median value in women’s DC retirement accounts was one-third less than that of men.
  4. Even though the median household incomes of individuals aged 65 and older has increased, women have 26 percent less income than men. While both women and men have decreased their reliance on Social Security since 2009, the proportion of income from defined benefit (DB) pensions has remained steady, supplying about one-fifth of income for both women and men. Older men and women have increased their reliance upon earnings since 2009.
  5. Social Security is an important source of income for older households with incomes less than $80,000. Women who are widowed, divorced, and over age 70 rely on Social Security benefits for a majority of their income. Black women rely largely on Social Security, while women of other ethnic groups also rely on wages to a large extent.
  6. Women are 80 percent more likely than men to be impoverished at age 65 and older, while women between the ages of 75 to 79 are three times more likely than men to be living in poverty. Widowed women are twice as likely to be living in poverty than their male counterparts. White and black women are almost twice as likely to be living in poverty than their male counterparts during retirement.
  7. Women in the health care, education, and public administration fields, where DB pension plans are more prevalent, have higher incomes in retirement and lower rates of poverty than in other industries, due to their increased participation in DB pension plans.