← HerMoney with Jean Chatzky
HerMoney with Jean Chatzky
Ep 528: You’re Already Behind – And It’s Not Your Fault: Closing The Retirement Gender Gap
00:34:28
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- [00:01]
A
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B
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- [01:05]
C
Having that guaranteed paycheck, whether it's Social Security, a pension, an annuity, takes a lot of complexity out of your day and your decision making. So that's one benefit and then there's other really interesting research. As a coach and a psychology major, I always find the emotional aspect of this really interesting. So I think of annuities as being that cognitive and emotional tool in the portfolio. But it's that sleep well at night. They make us feel safe and secure. We can be making some of these decisions emotionally that don't serve our interest, and having that guaranteed paycheck takes some of that risk away.
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A
Hey everybody, thanks so much for joining me today on HerMoney. I'm Jeanne Chatky. I know that you've all heard of the gender pay gap, but there is a quieter, maybe less obvious, related pay gap crisis that doesn't get nearly the same attention. And over time, it can do even more damage to women's financial futures. It's called the retirement gender gap, and it affects millions of women across generations, across life stages, across income levels. Whether you have stepped away from your career to care for a child or aging parent, whether you're a Gen X woman inching closer to retirement and wondering if you've saved, or you're single, managing finances and preparing for retirement on your own. You're going to want to listen up to today's show because we are welcoming two powerhouse women from the financial world who have been digging into this important topic recently, and they have plenty of advice on the steps that you can take to close the retirement Gender gap in your own life. First up, Tina Beckwith is LIMRA's chief marketing officer. Tina also heads LIMRA's Lifetime Income Initiative, which focuses on building awareness around the importance of protected income in retirement. Also with us, Suzanne Norman. She is a Retirement Income Institute fellow at Limra, a financial literacy educator, and an executive coach who lives by the motto knowledge is power. Together, Tina and Suzanne are going to help us put the pieces together and we're going to dive into who's most at risk, why the gap exists in the first place, and perhaps most importantly, what you could do about it. Tina and Suzanne, thanks for being here. Welcome.
- [03:41]
B
Happy to be here.
- [03:42]
C
Thank you. Thank you.
- [03:44]
A
As I said, we know about the gender pay gap. We have heard about the gender pay gap for years and years and years. But there is this ripple effect that doesn't get nearly enough attention and can be even more damaging to a woman's long term financial security. Tina, what is the retirement gender gap and why does it matter so much?
- [04:06]
B
Yeah, I mean, it's a great point, Jean. Women on average live longer than men. We know that. And that longevity gap means that wives will outlive their husbands and they'll need to fund a longer retirement. Women have other challenges that they face throughout their working years, including and largely driven by lower lifetime income. Their earnings are lower, they have a longer life expectancy, and they have more frequent career interruptions due to caregiving responsibilities, whether they're for children or aging parents. And you know, for many of the women who are in Gen X, the gap translates to whether they'll need to work longer than they planned to or wanted to, or they have to skip back their lifestyle. And as a result, women will often prioritize their financial security, predictability and guaranteed income, but as a way to create confidence and peace of mind in the face of all of those risks.
- [05:20]
A
So as I'm hearing you, there are a lot of challenges in what you just said. But Suzanne, as you think about it, is this an economic challenge or is this a knowledge challenge challenge, or is it both of them at the same time?
- [05:37]
C
Sally I think it is both at the same time. However, I'll add to everything. I agree that Tina said, I believe as an educator, financial educator, that when we think about education for personal finance, not even investing, we don't tend to receive it in school. The survey of the states by the Council of Economic Education surveys each year, how many states require personal finance to graduate high school? It did increase last year. It's 30%, nine states, but it's still not all of them. In fact, I live in one where it's not required, which is ironic. The other part of that is we're not learning basic economics. So you mentioned that in your question, Gene. Only 22 states actually require a class in economics to graduate. So I often say it's not your fault, but it is your problem for men and women, but particularly women, because you think about our financial power, it's very recent. If you think about credit, it was the Equal credit Act in 1974 when we could actually get a credit card or a bank account without a co signer. And it's only 124 years that we've actually all states allow us to own property. So yes, there's an education deficit and it's also a recent thing. So I always want to put the framework around that context.
- [06:53]
A
Let's talk Suzanne, and I'll stay with you about who is most at risk. There are a few groups of women where you see this gap and here I'm talking really about the financial gap. Show up. We've got Gen Xers approaching retirement, the first generation not to have a pension. We've got caregivers, we've got widows, we've got single women. I want to delve deeper into each one and take them one by one. But before we do that, we're to going, what do these women have in common that's problematic?
- [07:30]
C
Well, the interesting thing that I zero in on a lot when I research and write is this idea that women get labeled risk averse a lot. And I think it's deeper than that. There's a survey that's done in Canada by Barbara Stewart called Rich Thinking. And it's a qualitative survey. But what she's really identified and I respond to is this idea of risk awareness. So because of everything Tina just said, all these extra duties, we call it the second shift. You know, in a, in a marriage a lot of times or a partnership where she works, he works and she comes home and she still has a second job that's unpaid. So I would say that I'm most concerned about the older women at this point because when we analyze over 65 in the US over 52% will be solo and every marker that you gave. Divorce, never married, widowed.
- [08:22]
A
Yeah, that makes total sense. Tina, how much of this gap is driven by the disparity in earnings? I mean, we start with the gender pay gap. It's very tough to get away from that. The wealth transfer hasn't exactly happened yet and it's Proving to be a little bit more of a trickle. How much comes back to that factor?
- [08:46]
B
Yeah, quite a bit of it. I mean, this gap is driven by the fact, as you point out, women still earn less over their careers, and they're more likely to take time out of the workforce for caregiving. And both of those factors directly translate into the lower lifetime savings and smaller retirement balances. Plus, many Gen X women are in their peak sandwich years when we think about that sandwich generation, managing careers, kids, and often aging parents. So planning for themselves tends to fall to the bottom of their priority list over time. Consistently putting others first can result in interrupted saving patterns and a lower level of confidence with their own financial decision making. Add in the notion that women live longer than men, and that means that they ultimately need to fund more years of retirement.
- [09:47]
A
Let's start with the single women in the group. Whether they are widows, divorced, never married, they do face some pretty specific challenges. Suzanne, as I said, you've got a new research paper out specifically on widows. Talk to me about the single women and then widows specifically.
- [10:09]
C
Sure. When we think about the single women, they are paying for a full lifestyle and there's no shared cost or someone helping with that. So as Tina mentioned, they may have a harder time sometimes managing that household and spending more, frankly, so there's less savings. And when you think about single women, widowed women, when they age, they're also at a greater likelihood to be in poverty. Divorced women, there's the gray divorce that I think most listeners probably know about, but anyone over 50 is considered to be in a gray divorce. And women's lifestyle goes down by almost half and men's only by almost a quarter. So there are some significant headwinds when we have those life events. And when I think about single women, everything that Tina just said, the hardest formula or calculation of finance is longevity. We're missing an input. We don't know the end date. And so for these women, it's a solo journey. And that's one of the challenges.
- [11:11]
A
It's one of the things that makes the Social Security decision so important. Whether you are doing this on your own or whether you are making sure that you're maximizing your spousal benefits or your survivor benefits, you're likely to be the one holding the bag at the end of the road, and you've got to make sure that you're getting as much as you possibly can from that system. No group of women, I think, is that more true for than the 12 million widows that we have in the U.S. and yet, Tina, as you said, many of them have taken a backseat when it comes to financial planning as they try to boost their confidence, maybe even boost it in the midst of a crisis, in the throes of grief. What advice do you have for them?
- [12:07]
B
Women juggle so many different priorities, and I think the best advice that we can give to someone is to simply get started, take action, and sit down with your loved ones early. Have conversations around expectations. What level of care might you need, who's going to provide it and how it's going to get funded. And then build a plan. You know, protect yourself for today's needs and think about tomorrow's income with really intentional financial planning. Right. Having a formal written retirement plan is critical. Have conversations around different solutions like protected lifetime income in retirement. Where's your check going to come from when you stop working? And I think it's really important for women to work with a trusted financial professional. You're not alone. Right. Work with someone who you can trust to help map out what these long term scenarios might look like so that you can be more prepared.
- [13:16]
A
For the women listening, Tina, who are not familiar with the term protected lifetime income, explain what we're talking about and the different forms that it can take.
- [13:28]
B
Yeah, certainly. I mean, protected lifetime income can come in a few different forms. I mean, first let's think about Social Security or the traditional pension that really is more scarce today than it was 50 years ago. Those are often based on annuities and protected lifetime income as it shows up as a personal annuity. Right. You make an investment and you get a regular paycheck coming back to you that can help support your ongoing basic living needs. But there are options out there that can help provide more security and peace of mind for women who are exploring these options.
- [14:14]
A
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- [16:43]
C
Of course the advice we always give is just as Tina said earlier, just start. And it's pretty turnkey. But I think that's kind of the entry point of that challenge. The other thing that I would add is the healthcare costs and one of the things that we have mapped out, a firm that I worked for for about nine years has a healthcare index and one of the things that it can be a little paralyzing for people, but the only way back to knowledge is power. We can take action towards a goal is knowing what that is. But the average out of pocket cost and this is not long term care cost, but this is the average out of pocket cost for a woman retiring at 65 is over $300,000.
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A
For health care.
- [17:26]
C
For health care, not long term care. And we all know that long term care, the mistake is made often that it's included in Medicare and of course it is not. And when this paper is released, people will see some of these numbers. I don't want to quote all of them because it can be a little scary, but Tina said it earlier. Have those conversations. Have the planning conversation with your advisor because if we can start earlier to manage some of these expenses for the solos. It's going to be much more doable and there are considerable costs to consider.
- [18:04]
A
Let's switch gears just a bit and talk about a younger generation. Let's talk about Gen X. Many of our listeners fall into that group. Only 64%, according to Limra, of Women in that cohort are confident that they can achieve their desired retirement lifestyle. The number for men is higher. Tina, again, what are the factors here that are leading women to feel less confident than men? Is it earning? Is it longevity? Is it just the fact that we are willing to admit what we don't know more than men are, which I do think you kind of have to acknowledge? What else is in this soup?
- [18:51]
B
It's so important to recognize that because sometimes women, who particularly Gen X, as we said, sandwich generation, they have a lot of different priorities. They might feel like they've missed their window, but the reality is that maybe they just haven't had the clarity yet. So they can build their confidence by creating that plan that we talked about. Knowing where you are and where you want to go and always can help build confidence and give you peace of mind.
- [19:22]
A
I think the other piece of the secret formula here is investing. We know that women, although we're great investors, are often a little bit later to the party than men are, which is completely a confidence measure. We don't like to dip a toe in until we know that we know how to do something. And that could be knitting it, could be driving it, could be investing it could, you know, anything. We like to know the answer to the question before we ask it. And investing, that's not often possible. And yet I've witnessed, and Suzanne, I know you've witnessed, once women start investing, confidence just grows. So is this a matter of a little bit of fake it till you make it?
- [20:14]
C
You know, obviously we've got a younger generation that we know is probably more attuned to this because of perhaps employer plans, perhaps social media. So I would always say trust but verify. But I agree that the markets and the investment products have made things so much easier now with this, you know, target date funds, target risk funds. And that all sounds like jargon, I know if someone is listening, all it means is someone diversified this portfolio for you, and depending on your age, they may readjust that for you. So there's a lot more automation. But I want to amplify your point about women being really good investors. When we have studied this, we are better than men. And it's because Three things, at least in the last study that was done by University of Warwick. We trade less, we're diversified, and we're goal oriented. So it's not this whole kind of hot dot, you know, fear, greed, that's happening. We're not perhaps getting into conversations with other people saying, wow, I bought Nvidia at this price. So we recognize that the money is a means to an end.
- [21:18]
A
Although if you did buy Nvidia at that price, good for you. I'd like to turn to caregiving. This is one of the biggest drivers, as we've talked about, behind the retirement gender gap. Women, daughters are the ones who are more likely to step out of the workforce to care for kids, parents, other loved ones. Data shows that it comes at a cost of nearly $300,000 in lost pay over their lifetimes. Beyond the lost income, Suzanne, what else are we losing?
- [21:54]
C
There's a huge psychological impact, and I would say that that has. You said it earlier, Jean. Ripple effects. So recognizing that, as the old saying is, put your own oxygen mask on first, that we need to ask for help, and specifically to Gen X, when we think about caregiving ages, or at least the breakdown of men to women, it's about 60% women, and the average age is 51. So Gen X is right in the middle. And not every Gen X daughter is an only. So you have siblings and you have other people. And one of the things that I think if you're working for a company that you need to look at as a Gen X caregiver is what's that employee benefits package look like? Because a lot of times there are extra resources now with this generational shift, there's elder care resourcing. And so I would just recommend that people recognize they can't go it alone. And especially because of the psychology.
- [22:52]
A
It's such a good point. And I also think when it comes to. When it comes to those caregiving challenges, yes, it is a privilege in many cases to be able to be there for your parents. But I also think you need to look really hard at the numbers and ask yourself if a solution that allows you to maintain your foothold in the workforce, keeping your seniority, making sure you're contributing to your retirement accounts, and racking up those Social Security credits makes more sense, even if you're paying somebody else to take a bit of the load off your hands. We're gonna take a very short break. When we come back, we're gonna get a little more strategic and talk about the concrete steps you can take to narrow the Retirement gender gap. Back in a sec. Jeanne here and I have some really exciting news to share. My new book, the Forever PayCheck, comes out September 9th and pre orders are live right now. Here's what it's about. There is fascinating research showing that people who retire with a steady, reliable paycheck, like a pension or guaranteed income actually feel comfortable spending double in some cases what people with the same amount of money in assets spend. Yeah, you heard me right. They're spending double with the same amount of assets overall. And that means more travel, more time with the people you love, more of the retirement life that you have worked so hard for without the constant fear of running out. The Forever Paycheck is your guide, your step by step guide to building that kind of security for yourself no matter where you're starting from. Now a quick favor for me, pre orders genuinely matter. They signal to the booksellers and the publishers that there is a real interest in a book, which means more copies on shelves, more with women getting access to this information. If you've ever found value in this show, pre ordering this book is one of the most meaningful ways that you can support my work. So head to the link in the show notes to pre order the Forever Paycheck today. I cannot wait for you to read it. And thank you. You know, I have to say it. Cats are having a moment. Our producer Emily has two cats and every time their little faces pop up in our virtual meetings, it brings a little more joy to my day. Here's the thing though. As much as we love our feline companions, the litter box. Not so glamorous. That's where Whiskers Litter Robot comes in. It automatically cycles after every use. So you're never scooping, never handling waste, never doing that thing where you, you just hold your breath and hope for the best. I can see why Emily is so excited to start tracking their cats routines. The future is feline. Learn more about Whisker Litter robot models and starter kits today. Take an additional $50 off bundles with code HERMONEY. That's an additional $50 off bundles with Code HERMONEY. Visit whisker.com hermoney to shop now. Welcome back. I am talking with Suzanne Norman and Tina Beckwith about the retirement gender gap and how it impacts women. If you're someone who feels that she is behind, no matter what age you're in, no matter what cohort you fall into all of this, it can feel overwhelming. Tina, before we get into the specific strategies, is it possible to catch up? Is it possible to close the gap.
- [27:04]
B
As I said earlier, so many people might feel like they've kind of missed their window, but the opportunity to make change absolutely exists. So whether someone's been providing some caregiving support or focusing on other priorities, sometimes it's just their first time stepping into financial decision making for themselves. It can feel overwhelming. But the gap can be manageable. You know, little things like adjusting your timeline or making smarter use of what you already have can make a really big difference. The most important thing is taking that first step to start, because once you do, you can move from uncertainty to having a clear plan. And that sense of being overwhelmed will start to fade away as your confidence grows.
- [27:59]
A
For people who are thinking, I don't have a plan, I'd like to have a plan. Is this a big hurdle to clear? Suzanne, walk me through the steps of finding somebody to build this for you and tell me how easy this really can be.
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C
Coming back to the basics, oftentimes it's the budget. It's finding out where's the inflow, what's the outflow look like. And that's the foundation for all of this, because any formal plan is going to start with that cash flow, what's coming in and what's going out. So doing that checklist with yourself and understanding, you know, if, if you are already claiming Social Security, what's that look like? If you, as Tina has said, you know, it's usually just the older workers these days or perhaps a government worker that has a pension, but just figuring out what is coming in the door every month and what is leaving, and that's the most important thing for people to really get a handle on. I think once you're clear on your budget, it gives you a lot more control to figure out, oh, there's a little leakage.
- [29:05]
A
Yeah. And I think it gets you to the logical next step, which is then figuring out what portion of that budget will be covered by protected income in retirement. Look, you guys both know me very well, and I am a believer. I've become a believer in making sure that there is enough coming in in protected income income that will last the rest of my life. Social Security, pensions, annuities to cover my fixed expenses so that I don't have to worry about those things. And I'm not just talking about bare bones needs. I'm talking about needs and some wants that I really don't want to do without. The problem here is that while limber research shows that 75% of women believe as I do, that protected income is important only 39% understand how annuities work. How do they get past that? And Suzanne, let me throw that one to you, but Tina, chime in.
- [30:11]
C
Sure. So any history buff listening will know that annuities are not new. They have been around for thousands of years. In fact, working for an actuarial consulting firm, I, I think it's funny that the first life expectancy tables were designed by a Roman 2000 years ago. But essentially an annuity at the end of the day is a contract between you and an insurance company. And the first step is you give them typically a lump sum of money. We say lump sum all the time, but let's say it's $100,000, which could seem like a lot to some people, but the more you put in, the higher that income stream looks like. But essentially it is a guarantee that your money goes to the insurance company and they pay you as long as you live. And that's the cor concept. The second part of this is what kind? Because that's where I think a lot of, frankly, consumers and financial professionals get stuck, because there's a lot of customization and complexity. But I want to break it down and make it simple. You tend to have two types. You have one that says this is your rate of return and it is guaranteed. So I won't say that it is just like a cd, but it will feel a lot like that. So that's a fixed annuity. Then you have ones that are more exposed to the market. Now I have an Alphabet super of names, so I'm not going to throw them all out right now. But just to say that if you think about those two lanes, fixed rate of return, fixed annuity or a variable annuity, or some of the other names that are out there, but giving you market exposure, you're taking a little bit perhaps more risk for more return. But both, at the end of the day, have by contract the guarantee to pay you income you can't outlive. And that's really the end of the story.
- [31:47]
A
Thank you. That was very simple and incredibly clear. Is there one demographic or any one demographic that's best suited to put this sort of vehicle in their retirement plan?
- [31:59]
B
Tina, they're not for just any one type of demographic or person. They can play a really important role for people who value stability, want protection over longevity, and that simple peace of mind when they retire. Now with that, they can be especially helpful for certain people, including women. You know, women often live longer, as we've said, which means they need their income to last Longer. And many take time out of the workforce for caregiving, which reduces that savings, and they might have had fewer retirement resources to rely on. So for all those reasons, annuities are really important for women to assess and understand how they can help them meet their income needs when they retire.
- [32:54]
A
The other thing that we're learning, Suzanne, is that they help people with the spending side of the equation. Talk about that a little bit.
- [33:04]
C
Yeah, there's another fellow Limra, that I would point people to, Chris High, who's written extensively on one aspect of this, which is when we think about this intersection of aging and competency. So we've been talking about confidence a lot, and there's, you know, the old joke that just because you're confident doesn't mean you're competent. But this concern that we all have as we age is, are we going to be as astute with our decisions? And so having that guaranteed paycheck, whether it's Social Security, a pension, an annuity, takes a lot of complexity out of your day and your decision making. So that's one benefit. And then there's other really interesting research. As a coach and a psychology major, I always find the emotional aspect of this really interesting. So I think of annuities as being that cognitive and emotional tool in the portfolio. But it's that sleep well at night, they make us feel safe and secure. And again, behavioral finance teaches us that fear and greed. Again, we can be making some of these decisions emotionally that don't serve our interest, and having that guaranteed paycheck takes some of the risk away.
- [34:12]
A
I want to end this episode by talking directly to the woman who's been listening and thinking, oh, that's me. Maybe she's a caregiver. Maybe she hasn't looked at her retirement account in quite a while. Maybe she just got divorced or lost a spouse. What should she do right now to start closing her own retirement gap and create a little peace of mind about the future? Tina, we'll go to you, and then Suzanne will give you the last word.
- [34:41]
B
So the number one thing that women can do is take action. You know, particularly Gen X women who are known for being more fiercely independent, and I'm one of them. So I'll say that they don't necessarily lean into getting guidance, but they can do that on their own terms. So I would say take action. Find a financial professional. Start by talking to friends or. Or colleagues that you've worked with who are in similar circumstances. Ask about their experience and credentials, but most importantly, talk to them. Get a sense for if it's someone that you can relate with and always trust your gut, you need to find a financial professional who has that experience and the credentials and who you can trust and feel confident in partnering with to make your financial decisions.
- [35:36]
C
And Suzanne, I would say that one of the things that I find so interesting is as women, we tend to be great referrers. Meaning to Tina's point, you know, you're working with someone you really like, you trust, talk to that person and also talk amongst your peers. And back to Gene's point earlier that we have to be perfect, right? We can't go for that job. You know, we don't know everything yet. You know, whereas we all know men will say, sure, I don't know anything, I'll take that job. But I think it's true with the investing conversation and all of these personal finance conversations is open up these peer conversations. And I think it will find interesting that you know more than you do and starting today is the way that you get yourself pointed to the future.
- [36:22]
A
Amen to that. Tina Beckwith, Suzanne Norman, thank you so much for this conversation.
- [36:28]
B
Oh, my pleasure. Thank you for having us.
- [36:30]
C
Great to be here.
- [36:33]
A
And before we go, if you love today's episode, please take a moment to leave us a five star review on Apple Podcast. Your feedback means the world to me, but it also helps other women find the show. And if you haven't yet, be sure to pre order my new book, the Forever Paycheck. It's your guide to building a secure, steady income stream that actually lets you enjoy the return retirement you've worked so hard for. Tap the link in the show notes to pre order your copy today. Her Money is produced by Hayley Pascalides. Our music is provided by Video Helper. Thanks for listening and we'll talk soon.