Retirement: Women need to plan to overcome savings gap

Americans are still having a tough time meeting their retirement savings needs. According to the Government Accountability Office, among households ages 55 and older, “about 29 percent have neither retirement savings nor a defined-benefit (retirement) plan.” Among those ages 55-64 who have managed to sock away some money for retirement, the median balance is just $104,000 for a household — hardly enough to generate the income most will need to supplement Social Security.

Those numbers are sobering enough, but a separate survey from Financial Finesse, a financial education company, found that women are in much worse shape than their male counterparts. The retirement divide between men and women is significant. While neither men nor women are fully prepared for retirement, the average 45-year-old woman is more than $268,000 short of what she needs to retire comfortably at 65 — for the average man, it’s $212,000.

There are a variety of factors that explain the retirement savings gap. Because women live about five years longer than men, they need to accumulate larger retirement nest eggs. Additionally, women earn less than men over the course of their work lives, due to a number of factors: They flat-out make less money than their male counterparts in almost every field. Many have yet to enter the highest-paying growth fields that require science, technology, engineering and math (STEM) degrees. Many take time out of the workforce to care for children or aging family members. And working mothers often opt for flexibility over compensation to balance their work and family lives.

So what’s a woman to do to close the gap? If you have a spouse or partner, it’s imperative to talk to each other. According to an Associated Press poll, two-thirds of Americans say it is harder to talk to their partners about money than sex. Set aside a specific time and place to talk and try to reduce emotions by setting ground rules: No judgments — just open dialogue.

Share all financial information. Start by disclosing all accounts and debts, and basically coming clean. A number of polls show that couples often keep financial secrets, like hidden bank accounts or credit cards that carry a big balance. Like most secrets in a relationship, these can be damaging when they are ultimately disclosed.

You should also discuss your retirement priorities to ensure that you are both on the same page. Of course, this is likely to be an evolving conversation that will shift over time, but you and your partner need to articulate how you see retirement: Do you want to live near family? Would you like to travel? Does one partner want to call it quits, while the other is happy to keep working? In addition to running your retirement numbers, these qualitative decisions often help you build a retirement plan that can help you achieve your goals.

For single women, the path is even clearer: You need to commit to putting your retirement before almost all other financial priorities, even helping out your adult children. The first step is coming clean on where you stand in your retirement planning process. Yes, this can be as scary and painful as stepping on the scale or heading back to the gym after a lengthy hiatus, but it is necessary.

I recommend using EBRI’s Choose to Save Ballpark E$timate (choosetosave.org/ballpark) which is a great resource to crunch the numbers. You can analyze the impact of working longer, saving more and living longer. When you understand your status, you can then commit to changing your behavior. This might mean setting aside more money into retirement savings, reducing your spending or some combination of the two. One thing is clear: Only by tackling the issue head-on will you be able to mind and close the retirement gap.

Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes emailed comments and questions.