When Annuities Are a Better Deal for Women Than Men
October 29, 2019 by Benjamin Harris
When it comes to retirement, women often have it worse than men. They typically have higher poverty rates, lower Social Security benefits, and less saved in 401(k)s. But women do have a leg up on one aspect of retirement: When buying an income annuity through a workplace retirement plan, they can expect higher benefits relative to their male counterparts.
The benefit’s origins trace back to a 1983 Supreme Court case regarding employers offering male and female workers different pension benefits based on their life expectancies. The Supreme Court ruled that, as a form of sex discrimination, differential pension payments by gender violated the Civil Rights Act—meaning that companies had to offer men and women identical pension benefits. By extension, annuities purchased within employer plans were also subject to the same gender-neutral pricing.
In practice, this unisex-pricing standard is a boost for women due to substantially longer life expectancy: A 65-year old woman can expect to live, on average, about three years longer than a man of the same age. And since more years of life mean extra annuity payments, women can expect to get a lot more from their annuity over a lifetime.