As we observe Women’s History Month, themed, “Nevertheless, She Persisted,” there are things to celebrate when it comes to women’s potential retirement security. Women participate in DC plans at a higher rate than men at every income level, and their contribution rates are higher, too. Further, when controlling for income, women save more in DC plans and have higher balances.
Of course, because of differences in the wages of men and women, in the aggregate, men have retirement account balances that are more than 50% larger than women’s.¹ And women’s longevity can also present retirement savings challenges. The typical woman can expect to outlive her male counterpart by five years (age 76 versus 81).² This carries financial ramifications. As WISER (Women’s Institute for a Secure Retirement) points out in its Impact of Retirement Risk on Women report, because women live so long, they are:
- More likely to spend longer periods of time in a state of chronic disability
- Less likely to have a spouse-caretaker
In other words, not only are women likely to need to fund a longer retirement, they may also need to fund higher out-of-pocket health care costs in retirement as well.
An upcoming EBRI Issue Brief explores how much women are paying in out-of-pocket medical expenses in retirement compared to men, using actual reported medical expense of older individuals from the Health and Retirement Study (HRS).³
The data show that for those dying between ages 70 and 74, there is a less than 1 percentage point difference between men and women when it comes to their chances of entering a nursing home. However, the situation changes dramatically for the very long lived. Indeed, for those dying at the age of 95 or later, women are 13.5 percentage points more likely to enter a nursing home than men.
Once in a nursing home, expenses can be significantly higher for these older women than for their male counterparts. On average, the longest-lived women pay 44 percent more in cumulative out-of-pocket nursing home expenses than men ($75,310 vs. $52,365). At the extreme end of the distribution (the 95th percentile), that differential increases to 61 percent ($281,426 for women and $175,216 for men).
Again, the most likely explanation for this is that women live longer, are more likely to be single late in life, and often don’t benefit from spouses or partners as caregivers the way men may. This may hasten women’s entry into nursing homes as well as increase their length of stay once there. In fact, the evidence is that women are more likely to need more financial resources than men to meet their health care expenses during retirement, especially in cases where women outlive their caregiving spouse or partner.
So how does this translate into women’s confidence in being able to retire comfortably? In the 2017 Retirement Confidence Survey the Employee Benefit Research Institute finds only small differences between how women and men rate their confidence when it comes to various aspects of retirement income adequacy. For example,
- Sixty-two percent of men are confident about having sufficient money to live comfortably throughout their retirement years, versus 59 percent of women.
- Fifty-seven percent of men believe they will have enough money in retirement to take care of their medical expenses, versus 52 percent of women.
- Forty-four percent of men think they have enough money in retirement to pay for long-term care expenses, versus 41 percent of women.
However, things change when the sample is broken out by gender and marital status. Not surprisingly, married individuals register more confidence in being able to meet retirement expenses than single individuals. However, while the confidence of married men and women is virtually indistinguishable across the metrics, single men and women diverge materially in their confidence:
- Two-thirds of both married men and women register confidence in having sufficient money to live comfortably throughout their retirement years; but only 47 percent of single women are confident, compared to 54 percent of single men.
- Just over 60 percent of married men and women are confident in their ability to shoulder medical expenses in retirement; but only 37 percent of single women are confident compared to 48 percent of single men.
- Roughly half of married men and women say they believe they will have enough money in retirement to pay for long-term care costs; that compares to 31 percent of single women being confident versus 36 percent of single men.
The results make several things clear: the majority of single women are worried about their ability to sustain themselves in retirement, and this appears to be driven in good part by the specter of potential health care costs. But equally importantly, married women may be underestimating their likelihood of facing some of their retirement years alone—as well as the potential financial consequences.
¹How America Saves – Women versus Men in DC Plans, October 2015
²Population Reference Bureau
³Cumulative Out-of-Pocket Health Care Expenses after the Age of 70