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How the ‘Motherhood Penalty’ Widens Retirement Gender Gap

Saving is often an afterthought in women’s decisions about work and child care, new research shows

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Women save about 30 percent less for retirement than men, according to federal data. One reason for this disparity is obvious and well-known: On average, working women earn 82 cents for every dollar paid to men, a figure that hasn’t budged in nearly two decades. 

Recent research shows how another factor plays a key role in widening the retirement gender gap: motherhood. 

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Women remain far more likely than men to take significant time off from work for child care (as well as caregiving for older loved ones). That means not just losing income but forgoing contributions to workplace retirement plans and, in many cases, employer matches, not to mention reduced Social Security benefits — what Laura Quinby, a labor economist at the Center for Retirement Research at Boston College, calls “the motherhood penalty.” 

But a study issued earlier this year by financial firm TIAA and Brown University economics professor Emily Oster found that those long-term implications play relatively little part in the complex choices mothers must make around work, spending and saving. 

Because women live longer on average than men, they need to make their money last longer, says Melody Evans, a wealth management adviser at TIAA, but “there are headwinds to being able to not just save more — which, really, women should be doing — but even saving as much as men.”

Retirement a low priority

According to a 2022 Federal Reserve report, about a quarter of nonretired U.S. adults have saved nothing for retirement. Among the nearly 1,600 mothers surveyed for the TIAA/Oster project, the rate was nearly twice that — 47 percent. Another 27 percent reported saving less than they would like.

In a white paper summarizing the findings, Oster, whose work focuses on economic choices people make around pregnancy, parenting and health, notes that retirement is typically not top of mind for mothers making decisions about whether and for how long to leave the workforce.

Asked whether they put “a lot of thought” into various factors in deciding whether to work or stay at home, 60 percent of the moms surveyed said “being around my children” was a major consideration, and around half cited immediate economic concerns such as losing income or maintaining financial independence. Only one-third put a similar emphasis on the implications for their retirement. One in five gave the issue no thought at all.

Child care costs also loom large. Fifty-four percent of those polled said they would turn down a higher-paying job if the new role required them to pay more for child care. 

For many, putting aside money for the future simply bumps up against the reality of family budgeting in the here and now. Among respondents who reported saving nothing for retirement or not enough, 49 percent said they had no money left to set aside after meeting their monthly expenses.

“Sometimes when people are living paycheck to paycheck, it’s very difficult for them to think about saving money for 30 or 40 years down the road,” says Lori Trawinski, director of finance and employment for the AARP Public Policy Institute. “People are trying to get through to the next week.”

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Small savings, big payoff

Oster acknowledges the difficulties parents face in “weighing the factors that impact family income in the short and long term” but says starting early and setting aside even token amounts for retirement can make a surprisingly big difference in the long run.

“Women may feel that it isn’t worth it to save for retirement if they can only put a small amount of money in,” she writes, “but a small amount of money at age 30 becomes a much larger amount at age 65.” 

For example, saving $5 a month in an investment account beginning at age 30 can yield almost $10,000 by age 65, assuming a 7 percent annual rate of return. (The S&P 500 has averaged 7.5 percent over the past 30 years.) Boost that to $100 a month and you could have more than $160,000 in retirement savings, according to the TIAA/Oster study.

Evans, who has taken two maternity leaves and worked part-time for a year when her children were little, suggests families use online calculators such as those available from AARP and most financial services companies to estimate how much they will need for retirement. That way, they have a sense of how their current savings are affecting their long-term trajectory.

Married couples in which one spouse steps back from work to care for the kids should explore ways to build retirement savings for that partner into their budget, such as a spousal individual retirement account (IRA), says Cindy Hounsell, founder and president of the Women’s Institute for a Secure Retirement, an advocacy and education group.

Typically, someone must have earned income to contribute to an IRA. With a spousal IRA, a working spouse can make contributions in the name of a partner with little or no income of their own, provided the couple files a joint tax return.

“That could be part of the agreement between spouses,” Hounsell says — one that helps ensure a stay-at-home mom is building savings of her own in case the marriage ends.

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Paid leave rare

Along with the relatively low priority on saving for retirement in women’s child care decisions, the study cites a lack of information on the long-term effects of their choices and a lack of resources and support, particularly in the workplace, as factors in mothers’ lagging savings.

Only 32 percent of the women surveyed, and 21 percent of those with a high school degree or less, had access to paid maternity leave at work. Almost 44 percent reported self-financing parental leave out of savings, and about 1 in 12 planned to pull money from a 401(k) plan for that purpose.

That can be as costly as not saving in the first place: Taking $10,000 from a retirement account at age 30 would reduce a woman’s savings at retirement by $100,000.

“This is not to say that women should be pressured to return to work,” Oster writes. “Instead, it is a call to action for better paid leave — paid leave for more people, and more funding even for those who have paid leave already.”

The federal Family and Medical Leave Act guarantees job-protected parental leave to most workers at companies with 50 or more employees, but it is unpaid leave. Only seven states and District of Columbia require employers to provide paid leave for new parents (and for family caregivers); four other states are set to launch such programs in the next few years. 

AARP has long pushed at the state and federal level for paid family leave laws, and for expanding savings opportunities for workers who don’t have access to retirement accounts on the job, a group that includes 49 percent of women working in the private sector, according to a July 2022 AARP study.

“[Mothers] are faced with a very difficult situation — stuck between being the primary caregivers and having that responsibility and also facing labor market realities. It’s difficult to balance those two goals,” Quinby says.

“I don’t think it should have to be on women necessarily to solve the motherhood penalty. It’s a broader societal problem."

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