Recent research shows that about half of the mothers in the United States have no retirement savings. There is a significant disparity between them and fathers, of whom only one-third have no financial preparedness for their retirement years.
The research conducted by The Century Foundation shows that a staggering number of mothers in the country have nothing in the name of retirement savings. This is due to a combination of factors, including the effects of a pervasive gender-based wage gap, a lifetime of dealing with the pink tax, and what is often referred to as the “penalty of motherhood.”
Research conducted in 2022 showed that the difference in pay that women and men get, also known as the gender pay gap, hasn’t improved in almost two decades. Most women in the United States still earn only 82 cents for every 1 dollar their male labor force members earn. In 2002, they made just 2 cents less than that. This trend has only worsened through the decades since, in 1982, women earned a mere 65 cents for every dollar a man earned.
There are a few factors that are at play here. And one of the major ones is parenthood. Mothers between the ages of 25 and 44 tend to show less likelihood of joining the labor force than women who do not have children.
Even when mothers join the force, they are less likely to stay longer hours since home and child management duties usually primarily fall on them. This seriously hurts their career prospects, which, in turn, reduces the chances of them planning and saving for the future.
Conversely, men are more likely to work longer hours in the force, leading to career growth and income increments. This is considered the “fatherhood wage premium” and may negatively affect the gender wage gap. What is worse is that fewer than 47% of mothers in the labor force have a retirement savings account.
Then there’s also job or occupational segregation at work, where women seem to be directed toward lower-paying careers like teaching. At the same time, men usually opt for higher-paying jobs like engineering.
How to Fix a Broken System
At this point, government intervention has become necessary. The government must introduce policies to decrease the pay gap and fix the retirement planning system to help mothers who may not even join the workforce. For example, a stay-at-home mom could do with retirement plans run by the state since they do not have access to workplace programs. Automatic state savings plans can help mothers enroll if they are not covered by a 401(K). Automating the system would remove most of the effort mothers need to register under such plans.
Suppose a system could be devised to reward caregiving so mothers could be financially rewarded for childcare, cleaning, and management they do daily. The Democrats did introduce an Act like that in 2021. The Social Security Caregiver Credit Act was supposed to provide retirement benefits to caregivers, like mothers, who often quit the workforce to provide for current and future members of the same. But perhaps this is all wishful thinking at the moment.
That said, while changes are required at the policy level, and the system needs government intervention, here’s what individual mothers can do to start preparing for the future:
Maintain financial identity
Keeping one’s financial identity is essential even if you are a stay-at-home mom. This would mean maintaining a separate and individual savings account and having a healthy credit history.
Consider freelancing
If the era of remote work has done one thing, it is making work accessible. Now people who cannot visit offices can do their job from the comfort of their own homes.
For stay-at-home mothers, this means having the flexibility to maintain the household and care for their children while also earning money. If full or part-time work isn’t what you are looking for, freelancing can be a great option, especially since it allows you to set your hours.
Check your retirement savings and benefits options
You can opt for Spousal IRA if your spouse is in the workforce and you aren’t. If you were employed before and had a retirement fund with them, you can consider Rollover IRA. Also, remember to check your Social Security account and know what benefits you are getting.