Women are at greater risk in retirement. Here are ways to overcome a savings shortfall

What begins as a gender wage gap inevitably becomes a significant shortfall by retirement.

In the U.S., women who work full time are typically paid about 80 cents for every dollar paid to their male counterparts.

That gap has persisted despite women’s increasing levels of education and representation in senior leadership positions. Women are also still more likely to take time out of the labor force or reduce the number of hours worked because of caretaking responsibilities, often referred to as the “motherhood penalty.” 

That contributes to a growing wealth discrepancy, which is especially difficult to manage for those nearing retirement, according to Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.

“Not only do we start with less money in our pockets, but we also live longer and our costs in retirement are higher,” said Francis, who is also a member of the CNBC Financial Advisor Council.

By the end of a career, a full-time working woman will have lost out, on average, $417,400 of income, the Center for American Progress found.

Men and women have similar overall participation rates in their workplace saving plans, but men’s account balances are roughly 44% higher than women’s balances, largely due to the persistent gender wage gap, according to an analysis by Vanguard.

More than half of women workers, or 57%, feel they don’t have enough income to save for retirement and only 19% are “very confident” that they will be able to fully retire with a comfortable lifestyle, a separate survey by Transamerica Center for Retirement Studies found.

“Today’s women are more educated and enjoy unimaginable career opportunities than previous generations,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Yet, despite these advancements, women continue to be at greater risk than men of not achieving a financially secure retirement.”

At the same time, their life expectancy is five years longer than that of men.

“The statistics are sobering,” said Kelly O’Donnell, chief client officer at Edelman Financial Engines. “The math tells us it’s harder for women because they are going to live longer and have less.”

But there are moves women can make to narrow or even close the retirement gap once and for all, experts say. These three steps are key:

1. Start with ‘a financial look in the mirror‘

“One of the most important things they can do is take a financial look in the mirror,” Collinson said.

Most experts recommend meeting with a financial advisor to shore up a long-term strategy. Many employer-sponsored plans now offer counseling or one-on-one coaching. There’s also free help available through the National Foundation for Credit Counseling.  

“A natural starting point is checking with your employer’s retirement provider and working on a plan,” Collinson said.

Once you’ve identified where you stand, “you can start making plans to address expectations and assumptions that could possibly affect your long-term trajectory,” she said.

2. Take advantage of 2024 changes

The IRS recently raised the contribution limits to retirement accounts for 2024, increasing the thresholds to $23,000 for 401(k) plans and $7,000 for individual retirement accounts.

More employers have also introduced some type of emergency savings benefits, many as a result of the new retirement legislation in Secure 2.0 — a law that focuses on improving retirement security by making it easier for workers to build and access emergency cash.

“If your employer is offering you something akin to free money, take it,” Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York, recently told CNBC. “That’s always going to be beneficial.”

“However, if it’s not being paired with an appropriate amount of discipline, it doesn’t matter,” added Boneparth, who is also a member of CNBC’s FA Council.

Above all else, use this as an opportunity to make the most of the financial education being offered, he advised.

3. Reset your long-term strategy

The year-end process is a great time to reflect back and evaluate what the year ahead has in store, according to Kate Winget, chief revenue officer for Morgan Stanley at Work.

“Start with a look at all the benefits you can take advantage of,” she said, such as employer contributions to a 401(k), equity compensation and stock purchase plans. “This is where you want to maximize your retirement plan,” she said.

Then, “layer in health-care benefits,” Winget added. “This is part of the overall compensation.”

Whether married or single, women need to assess their situation and plan for this accordingly, she said.

Since women are more likely to outlive men, Francis advises her female clients to consider that at some point, “they are going to be on their own.”

That may mean having to work longer to reach their retirement goals, Collinson cautioned.

“When you do finally retire, you’ll have a larger nest egg and a short time to make that nest egg last,” she said.