BenefitsAll

Should Women Receive Retirement Income Subsidies?


Income inequality is a huge social and political issue this year. But just two years ago it was gender equality grabbing the headlines. It was then that the dual and dueling messages of two Ivy League-educated, wealthy, women received a lot of attention. Sheryl Sandberg wrote the blockbuster book Lean In… and Anne-Marie Slaughter wrote “Why Women Still Can’t Have It All,” for The Atlantic. Both touched on the difficulties of achieving work-life balance, pay equity and the impact of entering and exiting the workforce. Neither specifically discussed the impact of gender income inequality on women’s retirement income. But it is a conversation worth having.

Earnings Have A Real Impact On Retirement Savings

Most people are familiar with the equal pay for equal work efforts—the latest being the Paycheck Fairness Act. They are aware of the often-cited statistic that women who work full-time earn on average 77 cents for each dollar men earn. They may also know some of the reasons why the gender pay gap exists, including but not limited to:

  • More men choose higher paid professions like engineering and finance
  • More men negotiate raises and promotions than women
  • More women leave the workforce to take care of family
The bottom line is despite the reasons for the gender income equality gap; the result is that women have lower retirement savings than men because saving for retirement is linked to earnings. Social security benefits are based on average lifetime earnings. Defined benefit pension plan benefits are based on earnings and years of service from a specific job. And the ability to save for retirement and receive employer-matching contributions is also impacted by earnings.

A Solution to Women’s Retirement Savings Problem

Many suggest that women have less retirement savings because they don’t understand investments and other financial matters. This is true for some women, but it is also true of a lot of men. However, women are starting to come out of their financial shells and coaching other women to do the same. Women like Alexa von Tobel, Founder and CEO of LearnVest.com, a financial services website and Amanda Steinberg, Founder and CEO of DailyWorth, a financial media company, are helping women become better savers, investors and financial managers.

But so far no one is addressing the impact that the gender wage gap has on retirement savings. So I want to make a suggestion… Give women a retirement income subsidy to compensate for the non-paid things they do for society; like being the primary caregivers for the next generation of workers. I know this is not a revolutionary suggestion. I am not the first person to suggest that staying home to raise children is a job. But paying cash to women that choose to quit their jobs temporarily or permanently to raise children will never fly in this country. But a retirement subsidy that comes in the form of a more favorable Social Security benefit calculation or pension plan calculation just might.

And if you are thinking that women already receive a retirement subsidy because they live longer than men, you are missing my point. My point is that providing women with a retirement plan subsidy makes up for some of the wage inequality she experiences because she’s the sex who has children and is more likely to sacrifice her earnings to take care of them.

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