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How COVID-19 can wreak havoc on a woman’s retirement

MAR. 23, 2021

For years, there’s been talk of how women’s retirement planning needs are evolving. From a longer life expectancy to the gender pay gap to periods of time out of the workforce due to family responsibilities, women have shown that when it comes to retirement planning, one size does not fit all.

When COVID-19 hit, just like it did for so many other areas of society, it served as an accelerant to the problem, fanning a fire that has been steadily burning and now is roaring out of control. While almost everyone was affected during COVID—economically, physically and emotionally—women have been disproportionately impacted. Heightened worries and concerns among women due to COVID were highlighted in this recent blog post.

While we don’t have many historical situations to compare this to, the outcomes have been far more dramatic than in other economic downturns, our closest proxy. For example, during the recession triggered by the pandemic, women’s unemployment rate rose by 12.8 percentage points in just a three-month period, which was almost 3 percentage points higher than that of men. In contrast, the five previous recessions were all considered “mancessions” due to the larger rise in unemployment for men.

Why unemployment for women is skyrocketing during COVID

This flip in unemployment for women can be attributed to a perfect storm of compounding factors:

1. The industries women tend to work in—restaurants, retail, health care, hospitality—have been harder hit by the effects of the pandemic. More expense pressures, more narrow margins and far less flexibility for telecommuting all contributed to job instability, and at times, industry instability.

2. Mothers employed outside the home were already juggling the majority of family caregiving responsibilities while balancing their careers. Initial lockdowns shut down schools and took away sources of childcare—whether that be daycare, grandparents serving as babysitters or, later, summer camps—serving as a gust of wind to mothers’ carefully crafted house of cards. If telecommuting wasn’t an option, they were forced to choose between family care and their income, a gut-wrenching decision that more dramatically affects single mothers. Even if telecommuting was an option, the daily pressures of trying to fulfill job responsibilities while home schooling children, chasing after toddlers or caring for aging parents became a near-impossible feat. A recent blog post, which includes findings from a Nationwide Retirement Institute® survey, explores impacts to Black caregivers specifically, who are experiencing additional disproportionate impacts.

3. Finally, women hold more jobs at the low end of the pay scale compared to men.2 Whether that be in the service-oriented industries mentioned before or just towards the bottom of a company’s scale, they enjoy fewer benefits associated with higher paid jobs, like adequate time off and resources for mental health – critical benefits during COVID-19.

How today’s unemployment rates can have long-term impacts on retirement

Overall, the unemployment experienced by women could be permanent, or at a minimum, lead to difficulty finding a comparable job. This is particularly true during a tight job market that is shifting in unknown ways as our now accelerated digital society reconsiders a virtual vs. traditional work force. “The current economic downturn resulting from the COVID-19 pandemic is disproportionately hurting women’s employment, with ramifications that could be long lasting” according to the Monthly Labor Review. The authors estimate that 15 million single mothers in the US will be the most severely affected.3

We know the importance of retirement planning at 20-30 years prior to retirement.4 The challenges women face in their earnings shortage now will likely have a domino effect in years to come. The ripples may extend into their earning potential, their ability to contribute adequately to their retirement plans, and to the opportunity cost of the portfolio growth they should have experienced. If women need to turn to accumulated savings in order to take a hardship withdrawal, that impact is even more dramatic. One study found that women accounted for nearly 80% of pandemic hardship withdrawals.5

Provide support and add value for female clients with the help of Nationwide

So, how can you help your women clients navigate this unchartered territory? It’s simple: have the conversation. Having discussions now with your female clients about how they’ve been affected by the pandemic will help them refocus their efforts and help you recalibrate their plan early enough to get back on track or go in a different direction. The Nationwide Retirement Institute has carefully crafted the Women and Retirement Planning program to service this need. This program gives financial professionals insights into the evolving place of women in the workforce and the challenges they may face in retirement.

Sources and Disclaimers

  • 3

    https://www.bls.gov/opub/mlr/2020/beyond-bls/covid-19-recession-is-tougher-on-women.htm

  • 4

    https://www.nytimes.com/guides/business/saving-money-for-retirement

  • 5

    https://thenewdaily.com.au/finance/superannuation/2020/06/19/young-women-losing-retirement/

  • This information is general in nature and is not intended to be tax, legal, accounting or other professional advice.

    The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency.

    Neither Nationwide nor its representatives give legal or tax advice. Please have your clients consult with their attorney or tax advisor for answers to their specific tax questions.

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