Saving for retirement can be a daunting task for anyone, but research shows that for moms, it’s particularly difficult. On average, women and moms have 30% less money saved for retirement than men do, and they face unique challenges that impact how much they’re able to earn and stash away for later in life.
This is called the retirement gap, according to a new report by Emily Oster, a professor of economics at Brown University, and the Teachers Insurance and Annuity Association of America (TIAA), and it impacts the majority of moms. Nearly half of moms surveyed have no retirement savings at all, and the 27% who are putting money away say they’re worried they aren’t saving enough.
“There are many reasons why moms have anxiety about saving for retirement,” Oster says. “It’s hard to know where to start, we prioritize child care expenses, retirement seems far away and so on. It’s also daunting because we often think about retirement savings as requiring a big change. People equate savings with putting away a large chunk of their income, and that can seem impossible when your children are little.”
The good news, according to Oster’s report, is that even small changes in your saving habits can make big impacts down the road. Here’s what she says are the biggest challenges facing moms when they want to start saving for retirement and what they can do to get started right away.
“Forty-eight percent of women put a lot of thought into child care costs when thinking about working, but leaving the workforce when children are young loses retirement savings and potentially lowers wages later, even if you return to the workforce.”
— EMILY OSTER, PROFESSOR OF ECONOMICS AT BROWN UNIVERSITY
Why do moms have a harder time saving for retirement?
“Women on average have a longer life expectancy than men, so they need to conserve their retirement savings for a longer period,” Oster says. But not only do women live longer than men, they also typically have to build their retirement savings with less income. Here’s why:
Moms’ careers take a bigger hit when they have kids.
Women in the U.S. typically earn less money than men over the course of their careers. As recently as 2020, women were earning just 84% of what mean earned, according to a Pew Research survey. On top of that, women are more likely to leave the workforce—for the short or the long term—to care for their families.
“Costs in the moment really weigh heavily on our minds,” Oster says. “Forty-eight percent of women put a lot of thought into child care costs when thinking about working, but leaving the workforce when children are young loses retirement savings and potentially lowers wages later, even if you return to the workforce. That doesn’t necessarily mean it isn’t the right choice for your family. But the financial weight doesn’t necessarily favor taking a break, even with expensive child care.”
There’s less employer support for moms.
In addition to dealing with the gender pay gap and the potential impacts of time lost in the workforce, women also face a lack of support from both their employers and institutions. Of the women surveyed for the TIAA report, only 32% say they have access to paid maternity leave.
When women don’t have access to paid leave, research shows they’re likely to deplete their savings and dip into any existing retirement funds in order to take the time they need. And the retirement funds available to them may already be limited. Only 48% of women who participated in the TIAA survey say their employer offers retirement matching as a part of their employee benefits.
Moms say they feel under-educated on retirement and how to plan for it.
Planning for retirement can feel like a huge, overwhelming task, and a lot of moms simply feel under-educated about how to do it. Only 36% of women with at least a college level degree report putting a lot of thought into the impact of staying at home on their retirement savings. And less than half of women (49.2%) who are parents say they have the resources they need to consider the impact of motherhood on their savings.
“Even small changes can yield large dividends late. If you start investing $5 a month at age 30, that’s going to yield perhaps $10,000 at age 65.”
— EMILY OSTER
So, what should moms do to jumpstart their retirement savings?
If you haven’t started saving for retirement yet or just feel like you haven’t saved enough, the goods news is that it’s never too late to dive in. You don’t need to be able to make a huge lump sum deposit or stash away hundreds of dollars every month. Oster says these are the steps you can take to get started:
- Check out TIAA’s retirement calculator to determine your savings goal.
- Open a retirement account with your bank.
- Deposit a small amount of money into the account each month.
- Reassess regularly to see if you can increase the amount you’re saving.
“Even small changes can yield large dividends later,” Oster explains. “If you start investing $5 a month at age 30, that’s going to yield perhaps $10,000 at age 65. If someone currently aged 30 were able to put just $20 a month—the same cost as your average streaming service—in a retirement savings account at 7% interest, this would translate at age 65 to about $34,000 in savings.”
Oster also recommends taking retirement into consideration when making decisions about your career, child care options and whether to take time off.
“What I suggest people do is really sit down and calculate this out, taking into account your expected earnings trajectory, and your retirement savings,” she says. “If you take time off, what do you expect to be able to return to in terms of your career? What are the financial implications of scaling back? Spreadsheets can be daunting, but taking a hard look at your finances with the future in mind is just about the only complete way to make this decision.”
The bottom line on retirement for moms
Women face major hurdles when it comes to saving for retirement, and motherhood makes the challenge even more complex. But learning about the retirement gap and the financial challenges unique to women and moms also offers an opportunity for women to push back.
By taking their financial realities into consideration and making small changes that fit with their lifestyles, moms have the ability to make a huge impact on their financial futures. As Oster says, “By raising awareness around this issue and giving mothers the tools they need, we can help to close this gap for good.”
