Gender pay gap hurts more than your paycheck

Women, it's time take stock. Tuesday is Equal Pay Day, the date in 2016 that marks how far into this year women must work to earn just what men earned in the previous year.

But before you get too comfortable, consider this: that gender pay gap has implications far beyond the obvious disparity.

"The gender pay gap is the foundational part of everything" in women's finances," said Katie Libbe, vice president of consumer insights at Allianz Life. It influences everything from women's ability to contribute to a retirement plan to the Social Security benefits they accumulate, and even the amount they can invest on their own, she said.

For example, the gap is a key reason why women's Social Security payments in retirement are smaller than men's, according to a report published earlier this month by Congress' Joint Economic Council.

"Women generally have lower pay during their working years and spend fewer years in the paid labor force than men. As a result, the average monthly Social Security benefit for female retirees is 79 percent of what it is for male retirees," the researchers found.

That was not as important in 1960, when less than 40 percent of women age 62 and over were receiving Social Security benefits based on their own work record. By 2014, 51 percent of women were receiving worker benefits.

That does not mean they were earning as much as their spouses, however. Spousal benefits are just half what a worker receives, and married Social Security beneficiaries are generally entitled to the larger of their spousal benefit or their own worker benefits. So a wife could have a benefit on her income equal to 60 percent of her spouse's, and she would receive payments based on her earnings.

Negotiating a higher salary
Negotiating a higher salary

Other retirement income also is affected by the gender pay gap. For example, a growing number of employers are automatically enrolling workers in 401(k) plans at a contribution level calculated as a percentage of their earnings. If women's earnings are lower, their contributions will be as well.

Not only that, when women are paid less, they have to allocate a larger share of their income to cover their health insurance and other benefits, and that leaves them with less to set aside in a taxable savings account, Libbe said.

The gender pay gap may be one reason women are more worried than men about the impact of inflation on their long-term financial well being. A new study by Allianz Life found that 53 percent of women are very concerned or terrified that the cost of living will affect their retirement plans and 51 percent said they were very concerned or panicked about being able to afford the retirement lifestyle they wanted. Just 42 percent of men felt that way about either issue.

Added to that, women are likely to spend more time in retirement. The life expectancy for a 65-year-old woman today is 86.6, or more than two years longer than that for a 65-year-old man.

Sure enough, some 17 percent of women over 65 live in poverty, compared with 12 percent of men, according to an analysis by the Economic Policy Institute.

Women starting their careers today may not see much of a wage gap. Between ages 20 and 24, women's median weekly earnings are 92 percent of men's on average, according to an analysis by the Association of American University Women. But a 55-year-old woman earns just 76 percent of what her male counterpart brings home.

"Young women think there is only a small pay gap now, but if they wait long enough, they will find there is one," said Catherine Hill, vice president for research at the association. "People assume they are mothers, and assume perhaps unconsciously that they are going to take time out of the workforce."

Certainly, wage growth for women has stalled. The Institute for Women's Policy Research found that women's real median weekly earnings were 81.1 percent of men's in 2015, down from 82.5 percent in 2014.

"In the past ten years (2006 to 2015), the weekly gender wage gap narrowed by just 0.3 percentage points, compared with 6.0 percentage points in the previous ten years [1996 to 2005)] when change was 20 times faster than in the most recent decade," the researchers found.

Glen Martin | The Denver Post | Getty Images

Some employers are making attempts to close the gap. The tech company reviewed employees' salaries to identify disparities along gender lines, and spent roughly $3 million adjusting pay. In Boston, several dozen companies have signed a compact committing to "closing the gender wage gap in the workplace," according to the city's website.

For now, though, the gap persists. And when it comes to retirement, the gap is yawning.