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Pay Gap Shrinking but Women May Face Retirement Shortfall

Jan. 18, 2017
Investing, Retirement Planning
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The average American woman must save $1.25 for every $1 a man invests in retirement savings to build an equivalent nest egg, a NerdWallet data analysis shows.

For every dollar men earn, women in the U.S. make 80 cents on average, according to the latest available data. That wage gap today can lead to an even bigger divide down the road when it comes to retirement savings in a 401(k), traditional individual retirement account, Roth IRA or other plan.

To explore the outlook for women’s retirement savings, NerdWallet examined U.S. Census Bureau data from 2007 and 2015 to determine how annual income and wages changed over that time frame. We also charted the states that have seen the pay gap shrink the most in that period — and places where women have lost ground in recent years.

“Because of the wage gap, even women who consistently save the recommended 15% of income will end up with less money than their male counterparts,” says Arielle O’Shea, NerdWallet’s investing and retirement specialist. “Add in the fact that women live on average five years longer than men — and may actually need more money for retirement — and you have a significant retirement gap.”

States where women are gaining the most

While pay parity remains elusive, the gap is closing more in some states than in others, and that translates into a smaller shortfall in retirement savings. Of all the states in the 2007 to 2015 period, Rhode Island saw the earnings difference narrow the most; there, women have to save for retirement at a rate of $1.17 for every $1 men put away.

In Oklahoma — the bottom-ranking state for wage gap improvement during the same time period — women planning for retirement would need to sock away $1.37 for every $1 men save.

Key results

The retirement gap. On average, American women must save at an annual rate of $1.25 for every $1 men invest to build an equivalent retirement nest egg.

Pay gap improving. Women in the U.S. make on average 80 cents for every $1 men earn, as measured by median annual income. This is up from 77.5 cents in 2007.

States with smaller gaps. States with the smallest pay gap in 2015 were New York (where women earned on average 88.7% of men’s wages), followed by Delaware (88.5%), Florida (86.6%), North Carolina (85.9%) and Rhode Island (85.8%). The states where the gap is larger include Wyoming (64.4%), Louisiana (68.0%), West Virginia (70.6%), Utah (71.1%) and North Dakota (71.1%).

Not getting better everywhere. While the wage gap narrowed in 46 states from 2007 to 2015, three states — Oklahoma, Utah and Vermont — charted bigger gaps in that period and Texas saw no change.

Most improved. Women in Rhode Island saw the gap narrow the most, at 11%. Here, women earned 85.8 cents for every $1 men received, up from 77.3 cents in 2007.

Worst slide. In Oklahoma, the gap grew from 77.5 cents for every $1 men earned in 2007 to 73.2 cents in 2015, a difference of 5.6%.

» MORE: Are your savings on track for retirement? Find out with NerdWallet’s retirement calculator

More than ‘equal pay for equal work’

Does this mean women in Oklahoma should pack their bags for Rhode Island? Research suggests the issue isn’t so much that a woman working as a bank teller in any given state makes less than her male colleague at the next window; rather, it’s that the odds are greater that he will rise to bank manager some day.

The formula for determining the U.S. wage gap for full-time workers is simple: Divide the median income of women by the median income of men. The forces at play in the difference appear to be more complex than “equal pay for equal work,” researchers say.

The gap in wages may be related to the clustering of men in higher-paying positions and professions. A 2014 Harvard study suggests women are far more likely to take career breaks for child and elder care, which ends up limiting the number of women working in time-consuming jobs with little flexibility for family needs.

“The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours,” the study concluded. “Such change has taken off in various sectors, such as technology, science and health,” but remains the exception.

A look at the top and bottom states for wage gap improvement helps illustrate the study’s conclusion. In 2015, nearly 40% of workers in Rhode Island’s information sectors — including publishing, software and telecommunications providers — were women, up from 25% in 2007. Not only did women become a much larger part of the industry, they also made huge gains: Women’s wages in the information sectors outgrew men’s pay in the field by 39% over that period, according to census data.

In Oklahoma, the percentage of women working in the oil and gas industry — the state’s largest fields — held relatively flat at 17%, but in that sector between 2007 and 2015, men saw their wages go up four times as much as women did, census data show.

Impact on retirement

The nation’s men and women struggle equally to save for retirement. The National Retirement Risk Index suggests just over half of U.S. families aren’t saving enough to maintain their standard of living once they’ve retired. But the wage gap makes the challenge much more pronounced for women.

To maintain your current standard of living in retirement, financial experts suggest putting about 15% of annual earnings into a 401(k), IRA or Roth IRA to cover expenses after you’ve collected your last paycheck. By that measure, a woman in the U.S. would need to put away 18.8% of her yearly income to accrue as much as men saving 15% — which translates into women saving a rate of $1.25 for every $1 a man stashes away for retirement.

“The wage gap means women need to save more of every dollar they earn to accumulate the same amount of money as men,” O’Shea says. “That’s difficult to achieve, particularly when women spend more time out of the workforce to raise children or care for family members. Retirement savings may be put on hold during those times, and employer matching dollars are left on the table.”

A checklist for saving for retirement

To help keep the wage gap from expanding into an even larger retirement shortfall, we suggest these tips to maximize savings:

  • Get the full match on your workplace retirement account. Employers often will match — up to a limited amount — the cash you contribute to a workplace retirement account, such as a 401(k) or 403(b). Your contributions are made pretax, directly from your paycheck. Use NerdWallet’s 401(k) calculator to help plan workplace savings.
  • Set up a Roth or traditional IRA. IRAs also offer tax benefits to savers who qualify. If you are married and file taxes jointly, a non-working spouse can open and contribute to an IRA based on the working spouse’s income. For guidance on choosing an IRA, see NerdWallet’s top choices for the best IRA providers.
  • Use a taxable account. After maxing out tax-advantaged retirement savings accounts, you can invest further in the stock market’s long-term earning power. While there is always some degree of uncertainty when it comes to stocks, taking an appropriate level of risk can help the dollars you save work harder. See NerdWallet’s picks for the best online brokers.

» MORE: How much can you contribute to a Roth IRA? See NerdWallet’s Roth IRA calculator

State wage gap data

Scroll through the table below to see the ranking of all 50 states, how much the wage gap changed from 2007 to 2015 and how much women made for every $1 men earned.

RankStatePercent change in wage gap (2007-2015)Women's earnings for every dollar of men's earnings (2015)
1Rhode Island11.0%$0.858
3New Hampshire9.9%$0.764
8South Carolina7.8%$0.809
9New York7.8%$0.887
10New Mexico7.6%$0.846
13North Carolina6.8%$0.859
14New Jersey6.5%$0.820
15South Dakota6.4%$0.781
18West Virginia6.0%$0.706
36North Dakota3.3%$0.711

Kevin Voigt is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @kevinvoigt. Jonathan Todd is a data analyst at NerdWallet. Email: [email protected].


We analyzed the median annual earnings for men and women who work full time with data from the U.S. Census Bureau’s 2007 and 2015 editions of the American Community Survey. We also categorized the data by state. We analyzed:

  • Women’s earnings as a percentage of men’s earnings in 2007 and 2015. For example, if a woman makes $40,000 and a man makes $50,000, she makes $0.80 for every $1 that he makes.
  • The percentage improvement in the wage gap. For example, if women in a state saw their wages improve from $0.80 in 2007 to $0.90 in 2015, the wage gap narrowed by 12.5%.

For the retirement savings analysis, we used data from the U.S. Census Bureau’s American Community Survey to calculate the 2015 gender wage gap using the median U.S. income for men ($49,938) and women ($39,940). The median woman earns 80% of what the median man earns. This number was used to determine the retirement saving gap.

We also used 2015 earnings for each gender in Rhode Island and Oklahoma to calculate the percentage of income a woman must save to close the retirement gap in each state.