What Women Need to Think About in Saving for Retirement: 4 Considerations

Planning for retirement is different for men then women. Here are 4 major considerations to keep in mind:

Life Expectancy

Women, on average, live longer than men. In the US, the preliminary data for 2007 from the CDC shows that for all races, women have a life expectancy of 80.4 years while men have an average life expectancy of 75.4 years. That means that chances are you need to save for an additional 5 years of retirement than a man in the same position would save for. For Black or African American women (as categorized by the CDC) the life expectancy is different by nearly 7 years.

How much more you have to save will vary by your current age, expected rate of return, and the expected rate of inflation. So, removing those variables for a moment, if Man A died today, Woman A who theoretically spends $45,000 a year during retirement, will live 5 more years. So, she will need to have saved $225,000 more than Man A. That’s a lot of money.

Being Out of the Workforce

Women are more likely than men to take time out of the workforce - be it for extended travel, to raise kids, or dare I say it - to be a housewife. I don’t judge. I think we all wish we could just up and leave the workforce at times. But, if you leave the workforce you’re giving up retirement savings. Your contribution towards social security will be less and your ability to commit to retirement savings will be less. Suba has an awesome post on the effects of being out of the workforce and here are some calculations she ran:

For example, if Sarah earns $100,000, maxes out her 401k and her company matches 100% up to 5% of her salary, every year she misses the opportunity to save $22,000. At the end of 5 years with 5% ROI, her investments would have been at ~$125,000. This $125, 000 nest egg, in 30 years with 5% ROI will have provided her with $540,242 and if the market is good and she averages 8%, her $125,000 will get her 1,257,832, which is otherwise lost!

The reality is that if you are considering leaving the workforce, you should have a backup plan for saving for retirement. Starting your own business is a great option. Spousal IRAs are another option for some women. Either way, before you leave your job, have a plan to recoup the retirement loss.

Earning Less

Women still earn less, dollar for dollar than men. How to this factor into retirement savings? There are two ways earning less money plays out in saving for retirement.

  1. Just Plain Earning Less
    If you earn $50,000 while your male co-worker earns $61,500, you have less money available to you can save for retirement. It’s that simple. If you both want to save $7,500 a year for retirement, it means you have to work harder to save the same amount of money. Either you have to spend less, earn more or the side, or both.

  2. Work Matching Programs
    Most workplaces that match or simply contribute some amount of money towards your retirement typically do so on a percentage basis. For instance, I worked somewhere where the company automatically contributed 10% of my salary towards a 401k plan. Another place matched, dollar-for-dollar 5% of my salary.

    What does this mean? If, at a 10% contribution rate, I earned $50,000 per year, while Joe earned $60,000 per year (for the same job), I would get $5,000 per year towards retirement while Joe would get $6,000 a year. Sure, after one year this might not be a lot of money. But at the end of 30 years (assume the salary didn’t change in 30 years and a 7% rate of return) I’d have $510,365.21 in retirement savings. How much would Joe have? $612,438.25. That’s a difference of over $102,000!


Saving the most depressing topic for last - women also need to be conscious of the dreaded “D” word - “divorce.” No one likes to think about it, or plan for it, but the reality is that it happens. A lot. You should not take into account your significant other’s retirement savings in planning for your own retirement. If you can do that, you’re in the clear. Divorce disproportionally affects women. And the most prudent thing you can do is plan for your own retirement, as though you were going to be living it on your own, without anyone else’s assistance.

What else should women think about in saving for retirement? Have you planned for retirement taking these factors into account?