How to Calculate Your Pension Gap: A Step-by-Step Guide

December 01, 2025•7 min read

"I'll figure out retirement later—I'm too busy right now." If this sounds familiar, you're not alone. Thousands of professional women postpone retirement planning, assuming their current savings and pension will somehow be enough.

But here's what the data shows: women aged 60+ have pension pots that are on average 43% smaller than men's at the same age. The longer you wait to understand your pension gap, the harder it becomes to close it. Calculating your pension gap takes less than an hour, and knowing this number is the first step toward a financially secure retirement.

How to Calculate Your Pension Gap: A Step-by-Step Guide

Table of Contents

What is a Pension Gap?

The Gender Pension Gap Around the World

What causes these gaps?

How Large is Your Pension Gap? A Real Example

Step-by-Step: How to Calculate Your Pension Gap

Step 1: Determine Your Retirement Goal Income

Step 2: Identify Guaranteed Income Sources

Step 3: Account for Existing Investments and Savings

Step 4: Calculate the Annual Gap

Step 5: Calculate Total Savings Needed

Final Thoughts

What is a Pension Gap?

A pension gap is the difference between the retirement income you'll receive from your pensions and the income you'll actually need to maintain your desired lifestyle in retirement. Think of it as the financial shortfall you'll need to cover through your own savings and investments.

In the United States, women aged 65 and older receive 32.6% less retirement income than men—the gap in retirement income is actually larger than the 28% gender pay gap during working years.

In Switzerland, your AHV/AVS (1st pillar) and employer pension fund (2nd pillar) typically cover around 60% of your final salary. Financial experts recommend you'll need 80-90% of your last income to maintain your standard of living in retirement—which means there's an automatic shortfall of 20-30% unless you actively fill it.

The Gender Pension Gap Around the World

Before we dive into calculations, it's important to understand that women face a significantly larger pension gap than men. Across the European Union, women receive 13% less in pension income than men on average. In Switzerland, that gap widens to 18.4%, and in Germany it reaches 18.3%.

These aren't small differences. They represent tens of thousands of francs, euros, or dollars over a 20-25 year retirement.

What causes these gaps?

The gender pension gap starts long before retirement:

The Pocket Money Gap: Studies show girls receive less allowance than boys, learning early that they have less financial power and agency.

Career Breaks: Women are far more likely to take time off for childcare or eldercare, resulting in years of missing pension contributions. Even a 3-5 year career break in your 30s can reduce your lifetime pension by 15-20%.

The Glass Ceiling: Women earn less than men in comparable positions throughout their careers, which directly translates to lower pension contributions and smaller retirement funds.

Divorce: After divorce, women's pension wealth often drops dramatically while managing single-income households. Pension splitting isn't automatic in many jurisdictions and must be actively negotiated.

Health and Caregiving: Women are more likely to reduce work hours or leave the workforce to care for aging parents or ill partners, further reducing pension contributions.

Loss of a Partner: Women typically outlive their male partners, meaning they need retirement savings that last longer—often 5-7 years longer on average.

Understanding these systematic challenges isn't about dwelling on obstacles—it's about planning proactively to overcome them.

How Large is Your Pension Gap? A Real Example

Let's look at Anna, a typical member of the herFinancialFreedom community. She's 42, lives in Zurich, and earns CHF 85,000 per year as a marketing manager.

Anna's Current Situation:

Final Annual Salary: CHF 85,000
Expected AHV/AVS (1st Pillar): CHF 29,400/year (around 35% of salary)
Expected Employer Pension (2nd Pillar): CHF 21,600/year (around 25% of salary)
Total System Coverage: CHF 51,000/year (60% of final salary)

The Traditional Calculation:

Using the standard "80% rule," Anna would need CHF 68,000 per year in retirement (80% of CHF 85,000).

Traditional Pension Gap: CHF 68,000 - CHF 51,000 = CHF 17,000/year

That sounds manageable, right? Unfortunately, it's not the whole picture.

Based on actual costs of living in Switzerland—housing, healthcare premiums (which increase with age), maintaining an active lifestyle, modest travel, and unexpected expenses—a single person realistically needs around CHF 75,000 per year in retirement.

Anna's Real Pension Gap: CHF 75,000 - CHF 51,000 = CHF 24,000/year

If she retires at 65 and lives to 85 (20 years), that's a total shortfall of CHF 480,000. If she lives to 90—increasingly common for women—that gap grows to CHF 600,000.

And the earlier we start, the more manageable and empowering this becomes.

Step-by-Step: How to Calculate Your Pension Gap

Now let's walk through how you can calculate your own pension gap

Step 1: Determine Your Retirement Goal Income

Start by identifying how much annual income you'll need in retirement to maintain your desired lifestyle.

Rule of Thumb: Plan for 80-90% of your final gross salary.

More Accurate Approach: Calculate your actual expected expenses:

Housing (rent/mortgage, utilities, maintenance)
Healthcare and insurance (premiums increase with age)
Food and daily living expenses
Transportation
Travel and leisure activities
Emergency fund for unexpected costs

Step 2: Identify Guaranteed Income Sources

Now, calculate what you'll actually receive from mandatory pension systems.

For Switzerland:

1st Pillar (AHV/AVS): Request a pension statement from your cantonal AHV compensation office, or use the online AHV pension calculator at
2nd Pillar (Occupational Pension): Review your annual pension certificate from your employer's pension fund. This shows your projected annual pension or lump-sum retirement capital

For Germany:

Request a "Renteninformation" from Deutsche Rentenversicherung showing your projected state pension
Review your company pension (Betriebsrente) documentation if applicable

For the United States:

Access your Social Security Statement showing projected retirement benefits at ages 62, 67, and 70
401(k)/403(b): Review your most recent statement and use your plan's online calculator to project growth until retirement

For Hong Kong:

Mandatory Provident Fund (MPF): Log into your MPF provider's website to view your account balance and projections
Check all MPF accounts from previous employers—these don't automatically combine
Review any employer-sponsored retirement plans beyond mandatory MPF contributions

Step 3: Account for Existing Investments and Savings

Calculate what you've already saved privately toward retirement:

Investment accounts (brokerage accounts, ETF portfolios)
Individual retirement accounts (IRAs, Roth IRAs in the US)
Real estate investments (rental properties)
Other savings earmarked for retirement

Important: Only count liquid assets or investments you can realistically draw on in retirement. Don't include your primary residence unless you plan to downsize or relocate.

Step 4: Calculate the Annual Gap

Now subtract your guaranteed pension income from your retirement goal income:

Annual Pension Gap = Retirement Goal Income - Total Guaranteed Pension Income

This is the amount you need to cover every year from your private savings and investments.

Use these calculators:

Step 5: Calculate Total Savings Needed

To understand how much you need to accumulate in total, multiply your annual gap by your expected years in retirement.

Formula: Annual Gap × Years in Retirement = Total Pension Gap

Planning Horizon:

Men: 20 years (retirement at 65, life expectancy ~85)
Women: 25 years (retirement at 65, life expectancy ~90)

Subtract your existing private savings from your total pension gap:

Net Pension Gap = Total Pension Gap - Current Private Savings

This is your target—the amount you still need to accumulate before retirement to avoid financial shortfall.

But every woman's situation is unique. Your career path, current savings, risk tolerance, timeline to retirement, and cross-border considerations all require a personalized approach.

Book a 20-minute Clarity Call to discuss: