Retiring into Poverty

Millions of women retire into poverty every year. Women are not only outliving men, as Rachel wrote; they are also outliving their savings.

While the amount of money we each require for a secure retirement inevitably varies from one person to another, “poverty” is a far less subjective term. The US Census Bureau defines set poverty levels according to annual income. These vary according to household size and age in order to reflect the different needs of a large family compared to a single 70-year-old.

For a single retiree 65+, the poverty level is $12,261. If her total annual income, aka the sum of her earnings, social security payments, disability benefits, pension, returns on investments – essentially all incoming money – falls below $12,261, she is living in poverty. If she lives with a partner, it increases to $15,468. If the couple also takes care of a child or grandchild, it increases to $17,555.

In these circumstances, a woman would hopefully turn to her savings account to supplement her income. Herein lies the heart of the problem: only 40% of Americans have any savings at all in retirement accounts, according to the Congressional Joint Economic Committee. In fact, a 2018 study by Northwestern Mutual found that 1 in 3 Baby Boomers, the generation closest to retirement, has less than $25,000 saved for retirement.

The picture becomes even more bleak when you factor in race and marital status. According to a similar study by the Urban Institute, the average Black, single woman has only $13,000 in retirement savings.

Imagine having less than $25,000 set aside at a time when women’s life expectancy is at a historic high. Say you retire at 65 – you could easily live well-into your 90s. It’s no wonder women are outliving their savings.

There are 9 million women of retirement age who are living below 200% of the poverty line, which, for our single retiree comes in at $24,522. I’ve taken a cue from the Census Bureau in thinking about poverty in this broader manner, as it captures not only those women below the federal poverty line but also those who are close enough to not have what they need.

9 million women retiring into poverty. For some perspective, that is 27% of White women, 28% of Asian women, 45% of Hispanic women, and 46% of Black women aged 65 and older. (Author’s own calculations using Census Bureau data.)

There is a horrible sense of inevitability when it comes to women retiring into poverty. It’s something I’ve picked up on even as a 20-something in the workforce. As former Chair of the Senate Aging Committee Susan Collins (R-ME) stated, women face unique challenges when saving for retirement. “In general, women are more likely than men to take time away from the workforce to raise children or even grandchildren. They are more likely to care for an ill spouse or a parent.” In fact, according to a 2020 study by the AARP, 61% of caregivers are women. “Time out of the workforce often results in lower Social Security benefits, smaller pensions, and less in defined contribution plan savings.”

The American Council of Life Insurers (ACLI) actually calculated the cost of caregiving, and, on average, a woman loses over $300,000 in wages, Social Security benefits, and retirement plan income over the course of her life. Additionally, as Collins explains, “women also have a higher average life expectancy than men do, which can translate into higher expected lifetime health care costs and a greater risk of outliving one’s savings.”

That’s to say nothing of the pay gap, which compounds over time, leaving women with less income and fewer savings than their male counterparts. To this day, for every dollar a White man makes, Latinas make 55 cents, Native American women make 60 cents, Black women 63 cents, White women 79 cents, and Asian women 85 cents, according to a National Partnership for Women & Families study of Census Bureau data.

Our retirement system does not account for the way the majority of women operate in the economy. To quote Senator Maggie Hassan (D-NH) during Engage’s first Velocity Index, “our retirement system was designed for men.” Perhaps its shortcomings are not surprising, though, given that it dates back to the FDR era, when only about 25% of women were in the workforce.

Fortunately, the 2019 SECURE Act is modernizing our retirement system to reflect the economic realities of American women. Targeted towards small businesses, the group of laws reduces the cost and complexity of retirement plans. Small businesses, the majority of which are women-owned, often cannot afford the standard 401k plan of large law firms, corporations, and the like. The SECURE Act allows them to partner with each other and enroll in one joint retirement plan called a MEP, which will reduce the costs and administrative work of any one business. Now, more small businesses can take advantage of tax credits, and more women can save for retirement. To learn more about SECURE and what it can do for your small business, check out this toolkit put together by the ACLI.

We have Senators Collins and Hassan to thank for this piece of the SECURE Act. They are, however, the first to admit that it is just one step of the many required to secure women’s retirement. To hear more about the legislative road ahead and the challenges women and policymakers alike face, watch our Velocity Index entitled, “The Retirement Cliff,” which features Senator Hassan in conversation with ACLI President Susan Neely. In the meantime, it is our responsibility to persuade our elected officials to continue down this road, which, although less taken, could not be more direly needed.

Sophie Evans is the Policy Director at Engage. You can reach her at sophie@engagewomen.org.

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