Everyone should be saving for retirement. But if you're a woman, you should be saving more than your male peers.
This may not seem fair, especially as women already have a harder time making ends meet because of the gender pay gap. But unfortunately, it's necessary. And there are three big reasons why women need to go the extra mile when it comes to investing for their later years.
1. Women live longer
As of 2019, the average life expectancy at birth was 81.2 years for a woman and 76.3 for a man. If you're a woman who lives for the average amount of time, you'll need to fund an additional 4.9 years of retirement. You'll need a bigger nest egg to cover those extra years and ensure your account doesn't run dry while you're still relying on it.
2. Their Social Security benefits tend to be smaller
Savings and Social Security are the two primary sources of income for most retirees. Unfortunately, Social Security benefits tend to be lower for women as well -- both because of the gender wage gap and because women are more likely to work part time due to family obligations.
The Social Security Administration reported the average annual benefit for women 65 and over was $13,505 while the average benefit for men was much higher at $17,374. If the average woman wanted to have the same living standard as her male counterpart, she'd need almost $100,000 extra saved just to make up for the $3,869 shortfall in Social Security benefits (assuming she followed the 4% rule for retirement account withdrawals).
3. They're more likely to end up widowed
Older women are much more likely to be widowed than men, which makes sense because they live longer. Women are also more likely to marry older men than men are to marry older women -- which makes widowhood even more likely. And, when they are widowed, women are less likely than men to remarry. This means more women end up solely responsible for providing for themselves during part of their retirement.
While Social Security survivor benefits allow widow(er)s to keep the larger of the two benefits either partner was receiving, this could still mean a substantial loss of household income after a spouse's death. This can be especially damaging to women whose income was on par with their partners'. If each spouse was receiving $1,500 in Social Security benefits, the death of one partner would cut Social Security income fully in half. Expenses, on the other hand, aren't necessarily halved upon a death so the widow in this case would need to turn to savings to cover costs her husband's benefits previously paid for.
Since women are more likely to live for a number of years reliant only on their own income and savings without contributions from a spouse, it's imperative they have a larger nest egg to sustain them during this time.
Set your retirement savings goals and start saving early
With none of these factors likely to change anytime soon, women need to make sure they're doing what they can to protect themselves from financial struggles in retirement. That means starting to save as soon as possible and being aggressive in the amount invested.
If you're a woman and you haven't already, set a retirement savings goal and begin making automated contributions to a tax-advantaged retirement plan to ensure you hit your target. This is actually good advice for both men and women. But as you can see, it's especially important for women because their retirement is likely to look very different than their male counterparts'.