Women continue to make enormous gains in the workplace. They are steadily rising in the management ranks and dominate new graduates in many professional fields. Their income gains have been slower to materialize, but it's still safe to say that the economic gap between the sexes will get narrower.
That's not true, however, for older women. They earned much less than men during their working lives, which has led to lower private pensions and smaller Social Security payments. Because women continue to live, on average, several years longer than men, they must stretch their smaller retirement nest eggs over more years, further weakening their economic positions.
And because there are so many more older women than men, many women live alone and don't benefit from the lower living expenses enjoyed by couples. Men, by contrast, are much more likely to live with a spouse, and tend to remarry if their wife dies.
"Older women are at greater risk of economic insecurity than older men," according to a new study from Wider Opportunities for Women (WOW), a Washington nonprofit. Its analysis of U.S. Census data found that 60 percent of women and only 40 percent of men age 65 and older who live alone or with a spouse have incomes insufficient to cover basic daily expenses.
The organization has developed an Elder Security Index that looks at what it costs to afford basic necessities without seeking public assistance. For a person age 65 or older, the monthly income needed to cover these expenses ranges from $1,592 to $2,405. For a couple age 65 or older, the range of sufficient monthly income is about $2,454 to $3,267. For both examples, the $813 difference is due to housing expenses, which vary depending on whether the person owns their home with no mortgage, rents a one-bedroom apartment, or owns their home but still pays a mortgage.
"When women reach retirement age, they typically have smaller pensions and fewer assets than male workers," the study says. "In addition, women typically outlive men, which increases their chances of living alone for some portion of their retirement years and of exhausting savings and assets. The loss of a spouse or partner may reduce household income, without a proportionate reduction in household expenses."
The problem is acute in minority households, WOW says. "While nearly one-half (49 percent) of older white women live in households with insufficient incomes in retirement," it finds, "61 percent of Asian women, 74 percent of African-American women and 75 percent of Hispanic women report household incomes below the Elder Index."
There is no easy solution to the financial risks facing older women. Financial advisers stress that efforts to deal with such problems should begin decades before retirement. Husbands need to consider better preparing their wives, and their households in general, for the financial consequences of widowhood.
"One of the first things we ask our clients is. 'Do you live above your means, at your means, or below your means,'" says Irving Schorsch, head of Pennsylvania Capital Management in suburban Philadelphia. "And often, they don't know."
The answer is crucial because it links to the reality that longer life spans are creating 30-year retirement windows for many couples. Adjusting their spending now to support future retirement needs may be essential for the couple and, should one spouse die, will also improve the retirement income picture for the surviving spouse.
Couples should build what he calls a "Plan W" for widowhood that anticipates the death of a spouse. This should be done before a crisis hits. "The time of loss is often a very emotionally charged time for everyone in the family," Schorsch says. "Having a plan in place provides confidence to everyone."
Such preparation should include attention to future long-term care needs and estate decisions affecting children, grandchildren, and other legacy issues. He also advocates that men, in particular, retain life insurance into their older ages to support their wives.