Women Lag in Retirement Readiness

Today, women may equal or outnumber men in the workforce, yet many are woefully less prepared for retirement than their counterparts. Five years ago, women accounted for 47 percent of the total U.S. workforce, but between 2008 and 2018 that number is expected to hit 51 percent, according to a Women in the Labor Force Department of Labor report (2010).

Despite accounting for half of all workers, “women face challenges that often make it more difficult than men to adequately save for retirement,” as outlined in Savings Fitness: A Guide to Your Money and Your Financial Future by the DOL. Some of the key challenges include:

• On average, women are paid less than men and work fewer years.
• Women are more apt to experience career interruptions, work part-time, and/or are less likely to receive retirement benefits.
• Women typically live five years longer than men, and therefore need more money for retirement.

Despite these issues, studies like Do Financial Knowledge, Behavior, and Well-Being Differ by Gender? by The Urban Institute ( February 2014), also show women have less financial knowledge than men.

And, women are “less likely to respond correctly and more likely to state they do not know the answer to a financial literacy question,” as explained in the Global Financial Literacy Excellence Center (GFLEC) December 2014 overview: How Financially Literate are Women? The GFLEC authors also found that women are more likely than men to assess their financial skills as “low”.

When it comes to saving for retirement, LIMRA’s report, Gender Matters: Retirement Savings of Working Men and Women, February 2011 found “average DC plan balances of working women 50 years or older are below those of working men of the same age by nearly $63,000.”

The LIMRA study notes that while contributions by women were higher than men, lower pay and career interruptions resulted in less total savings. Making matters worse, women’s retirement nest eggs are generally growing at a slower rate than their male counterparts. A 2013 BlackRock Investor Pulse survey found that women are generally more risk averse than men when it comes to saving and investing.

“While greater risk aversion can help investors avoid unnecessary risks and losses from short-term gambling in the stock markets, women who concentrate their investments in lower-risk assets, such as cash and fixed income securities, while shunning the riskier equity markets, risk falling short of their retirement and other long-term financial goals,” explains BlackRock investment strategist Nelli Oster in her Men vs. Women: Risk Aversion blog.

So, what does all this data mean for retirement plan sponsors? Sifting through the studies, here are a few key messages and helpful suggestions:

• Although many women with low financial literacy recognize their lack of knowledge, few seek help because they are often given poor advice, according to the GFLEC study. We can change this with both employee education programs and one-on-one advising.
• Over 50 percent of women want information that’s easy-to-understand, according to Fourteen Facts About Women’s Retirement Outlook…and Seven Steps to Improve It from Select Findings from the 14th Annual Transamerica Retirement Survey of Workers (March 2014). We need to make sure education materials are relatable and not full of jargon or hard to grasp concepts. We may know retirement planning language backwards and forwards, but many participants are not familiar with the terms.
• Like many employees, women have other financial obligations that may make it hard to save for the future. However, programs like auto enrollment and auto escalation can help women start and grow their savings faster. Transamerica also suggests that women should contribute as much as possible, and if available, “take full advantage of employer matching contributions.”

Women—and men—need help saving for retirement. Preparing for the future is vital for all Americans. Now, more than ever, we must recognize and address the varying issues that confront different genders, age groups, and other diverse sectors in order to make a difference.

The opinions voiced in this material are for general information only and are not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or advisor for guidance on your specific situation.