The Retirement Income Gender Gap

The Retirement Income Gender Gap--Dealing with a Shortfall

When you determine your retirement income needs, you make your projections based on the type of lifestyle you plan to have and the desired timing of your retirement. However, you may find that reality is not in sync with your projections, and it looks like your retirement income will be insufficient to meet your estimated expenses during retirement. This is called a projected income shortfall.

There are many reasons why women, on average, are more likely than men to face a retirement income shortfall. Because women's careers are often interrupted to care for children or elderly parents, they may spend less time in the workforce. When they're working, women tend to earn less than men in similar jobs, and they're more likely to work part-time. As a result, their retirement plan balances and Social Security benefits are often smaller. Compounding the problem is the fact that women often start saving later, save less, and invest more conservatively than men, which decreases their chances of having enough income in retirement.1 And because women tend to live longer than men, retirement assets may need to last longer.

If you (or you and your spouse) find yourself facing a shortfall, the best solution will depend on several factors, including the severity of your projected deficit, the length of time remaining before retirement, and how long you need your retirement income to last. In general, you have five options--save more now, delay retirement, find new sources of retirement income, spend less during retirement, and/or seek to increase the earnings on your retirement assets (but by doing so you could also increase your risk of loss).

Save more, spend less now

Save as much as you can. Take advantage of IRAs, employer plans like 401(k)s, and annuities, where investment earnings can potentially grow tax deferred (or, in the case of Roth accounts, tax free). Utilize special "catch-up" rules that let you make contributions over and above the normal limits once