Data shows that the gender wage gap continues, with women earning less then men. A new study illustrates how that gap impacts retirement possibilities for women. Some public officials hope new legislation can create shifts. Plan sponsors can mind the gaps too.
Wage Gap: Compounded
The COVID-19 pandemic has been particularly disruptive to women—and their finances, but the retirement prospects for women have been impacted since long before the pandemic hit. 401k Specialist reports:
It was the National Women’s Law Center that found the average woman loses more than $400,000 over a 40-year career due to pay inequality, requiring women to work for almost a decade longer than their male counterparts to make up the gender wage gap.
Recent data from Human Interest, a 401k provider for small and medium-sized businesses (SMBs), found that after 40 years of earning the average salary for their gender, a man would end up with a 401k balance that breaks down into a $2,200 payout every month for the rest of his life whereas a woman would have 30% less—only $1,500 a month.
“Just like savings can compound, the wage gap can compound, too, into something much bigger—and in this case—more financially devastating by the time a woman reaches retirement,” said Human Interest CEO Jeff Schneble.
Retirement Plan Adjustments?
Pension industry experts observe that changes in how retirement plans are set up and administered can contribute to closing the gap. Legislative efforts under consideration, could, for example:
• Strengthen consumer protections to safeguard retirement savings by expanding existing spousal protections for defined benefit plans to defined contributions plans to prevent one spouse from making decisions that might undermine a couple’s retirement resources without the other’s knowledge and consent.
• Ensure more part-time workers are offered retirement savings plans by expanding the minimum participation standards for part-time workers—most of whom are women.
• Increase access to information about retirement and savings tools by providing grants for community-based organizations to help provide information and financial tools to women who are of working or retirement age.
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