U.S. households’ retirement difficulties are exacerbated by social inequality, according to a recent report, especially gender inequality—but improving retirement plan design could provide a partial solution.

The median annual income for women aged 65 and older is 42 percent lower than that of men, according to “Closing the Retirement Income Gender Gap: The Opportunity Is Now,” a paper by Newark, N.J.-based Prudential.

“Plan sponsors should find this retirement-income gender gap alarming,” wrote the researchers. “Fortunately, plan sponsors can help close the retirement-income gender gap through customized plan design, participant engagement programs, and holistic education that focuses on participants’ financial wellness—their ability to achieve the foundational elements of financial security: managing day-to-day finances, protecting against key risks, and achieving important financial goals.”

Currently, women constitute 47% of the U.S. workforce, and 40% of working women are in managerial and professional positions, according to the report. That represents significant progress since 1975, when just 18 percent of working women were in managerial or professional jobs.

Yet a significant earnings gap between men and women persists. In the U.S., an average working woman earns 21 percent less than an average working man. While a portion of this earnings gap is caused by different career and lifestyle choices between men and women, gender discrimination still sandbags women’s ability to earn an income and thrive during their working years.

The gender earnings gap has implications for women as they age. For example, the average woman qualifies for Social Security benefits 23% lower than the average man.

Less income also translates to a decreased ability to save for retirement: The average woman has saved 32% less for retirement than the average man, according to the report.

Unique Challenges

Women also face a particular set of retirement challenges, the most obvious being longevity. On average, women have life expectancies five years longer than men, requiring higher levels of retirement saving. The report’s authors also found that women face higher retirement health-care costs, needing an average of $140,000 by age 65 to have a 90% chance of covering their health care costs, versus $124,000 for men.

The report’s authors also note that women are more likely to spend their senior years single than men. Not only are there more older women than older men, divorce has become more prevalent and accepted and a higher proportion of women are choosing to remain single – or never marry in the first place. After age 65, only 45% of women are married, compared with 70% of men. Single and divorced indviduals can't pool resources with a spouse.

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