TIAA’s Diane Garnick Discusses the ‘Gender Retirement Gap’

Women face more hurdles that men when it comes to saving for retirement, but careful planning can help level the playing field, according to Diane Garnick, chief income strategist at TIAA.

“Intuitively, you probably think to yourself, if men and women are getting the same pay, and saving the same amount each paycheck for retirement, they should have the same level of wealth saved at retirement, but it doesn’t work out that way,” Garnick told students at the Yale School of Management on February 21. “In order for them to have the same savings at retirement, men need to save 10% of their paychecks whereas women need to save 18%.  Where does the difference come from?”

Garnick discussed this “gender retirement gap” at Yale SOM during an event sponsored by the International Center for Finance and jointly hosted by the Investment Management and the Women in Management clubs.

Garnick outlined the challenges that many women face in saving for retirement, highlighting strategies that can help offset them. Lifetime earnings and saving habits differ widely for men and women, she explained. In addition to the income wage gap they face, women also work fewer years than men over their careers, with many more women than men leaving the workforce for extended periods to provide childcare and eldercare. Men average 38 working years to women’s 29, Garnick said. This gap in employment negatively impacts both a woman’s savings and her Social Security benefits.

Women are also more risk averse when investing, often excluding themselves from taking chances on the products that generate the largest returns, Garnick said.

In addition to facing a retirement savings challenge, women also face higher expenses than men during retirement. “To begin with, women live longer, so naturally they will spend more,” Garnick said. “Healthcare costs are higher for women, and in retirement healthcare can quickly become the dominant expense in a retiree’s budget.”

Luckily there are a few simple principles that women can embrace to mitigate the strikes against them. “Save more than the IRS maximum deductible amount,” Garnick said. “Invest early and often, saving as much as you can. Every dollar you spend today is simply borrowing from your future self.”

Women could also benefit from higher levels of risk since their money will need to work for them longer.  “When you are young and have a long investment horizon, marginal risk can yield higher returns,” Garnick said. “Saving more today is a good way to maximize your savings.”

In retirement, women can also benefit from guaranteed lifetime income, especially if it’s available through their employer.  “When companies offer lifetime income to their employees, they typically use gender neutral assumptions,” Garnick pointed out.  Since women live longer, this creates an economic advantage for them.  “One of the biggest mistakes women make is retiring from a company, taking a lump sum from their retirement plan and then buying a lifetime income solution from a private firm that uses gender specific assumptions.” 

Overall, women have the opportunity to narrow the gender retirement gap by saving more, investing in a customized portfolio, and purchasing a high level of guaranteed lifetime income, Garnick said.

About the Event

Many people save for retirement through their employer, who in turn applies gender-neutral saving rates, investment choices, and spending strategies in retirement. Intuitively this creates a sense of fairness, but this intuition masks the reality that many women face. Lifetime earnings and spending in retirement are anything but average for women. Consequently, the challenges women face are arguably greater than those confronted by men.

On February 21st, Diane Garnick, Chief Income Strategist at TIAA, will speak at Yale SOM on the topic of the gender retirement gap, which she has written extensively on. The talk is being sponsored by the International Center for Finance and jointly hosted by the student-led Investment Management Club and the Women in Management Club.

The talk will be held at 11:45 am – 12:45 pm in Classoom 4430.  Sign up here.

More information on the gender retirement gap can be found here: