401(k)s are set up so that participants will accumulate funds during their working lives and then purchase annuities with those funds to finance their retirement. They could also actively manage their portfolios during retirement, but most experts agree that annuitizing produces more stable income security.
The annuity business is based on calculating life spans. Since women live on average longer than men, they will collect annuities longer. To compensate for making more payments to women, issuers of annuities lessen each payment to female retirees.
Vanguard’s annuity calculator allows a test of this. Inputing a 65 year old male with $100,000 to spend produces a quotation for a single life fixed monthly annuity of $692.60. Changing the gender produces a new quotation of $633.67–8.5 percent less.
While this discrimination may make sense actuarially, it does not make human or social sense. We can safely assume that the monthly cost of living of women is not 8.5 percent less than that of men.
The formulas for determining traditional defined benefit pensions by law do not distinguish men from women.
James W. Russell