Publisher's Perspective

While some attention has been paid over the years to the wage gap between men and women—to the detriment of the latter—there is newly emerging concern about a similar gap in retirement preparedness. Among federal employees the gap apparently is narrower, but it still exists and there are some things an employee can do about it.

A congressional study says that overall, lower earnings during working careers for women translate later on into a retirement income gap. The median income—the point at which half are above and half below—for men age 65 and older is $25,409, compared with $15,209 for women. The figures were based Labor Department population surveys.


A primary contributor to retirement income for those surveyed was Social Security, whose benefits are based on a formula including years of service and salary during peak earning years. Social Security benefits on average are $11,057 for women and $15,557 for men—71 percent. Similarly, incomes from private and public annuity systems, such as federal retirement—which also are based on a combination of salary and years of service, although with differing formulas—were 48 and 60 percent of the benefits for men.

“Lower earnings also affect women’s ability to contribute to other retirement-saving plans, including defined contribution pension plans and individual retirement accounts. Although not directly based on a worker’s earnings, smaller take-home pay translates into less disposable income to dedicate to saving for retirement. Among women 65 and older who receive income from these types of savings and investment vehicles, their income was half that of men’s,” the study said.

The study said that on average, women age 50 and older earn 75 percent of what men earn, and that women age 65 and older earn 60 percent of what men earn. “While addressing the gap between men and women’s earnings is important for current workers, closing the gap would also bolster women’s retirement security,” it said.

The wage gap is not as severe an issue inside the federal government. That’s largely due to the much-reviled general schedule pay system, which sets pay for different levels of work, with very little discretion for management to engage in gender discrimination.

Still, earning even a little less year after year naturally will cause someone to fall behind, and not just when it comes time to calculate the high-3 average salary at the end of a career. For example, a report by the MetLife Mature Market Institute said that the effects of the gender gap are being felt in various ways, with nearly two-thirds of working women in a survey it conducted saying they fear they may never have enough money to retire, half concerned that they will outlive their retirement income and nearly half concerned that they won’t be able to afford their health care expenses in retirement.

The report recommended a series of steps including:

* Save the maximum in tax-advantaged retirement plans such as the TSP and 401(k)s, including making the maximum “catch-up” contribution if you are age 50 or older. Also save the maximum in IRAs, including catch-up contributions to those accounts. If you cannot make full contributions, look for ways to cut current spending.


* Consider working several years longer than your projected retirement date. This increases both current income and benefits from work-based annuity programs. Get estimates of the potential effects on benefits of working longer.

* If you are concerned about inadequate ongoing income, consider using assets including savings in retirement programs to purchase an annuity.

* Consider purchasing disability insurance to protect against loss of income during working years due to a disability and consider purchasing long term care insurance to protect against the costs of such care. Also review your life insurance coverage to determine if it meets your needs.