A quick search of our website, using the terms “women” and “retirement,” brings back an article from August 2008 that describes retirement planning as “a nightmare for many women.”
In said piece, former HRE freelancer Marlene Prost shed light on female employees’ well-founded worries about outliving their retirement savings, and urged HR leaders to “step in with help” for women workers, who live longer than men on average while typically earning less.
As I sat this morning reading a press release summarizing new Aon Hewitt research, it felt like Prost’s article could have just as easily been written in 2016.
In other words, the story remains largely the same.
In examining the retirement saving and investing behaviors of roughly 3.5 million defined contribution participants from more than 125 employers, the Lincolnshire, Ill.-based Aon Hewitt found that 83 percent of women aren’t saving enough to meet their needs in retirement, compared to 74 percent of men who feel they aren’t putting enough away to live comfortably after leaving the workforce.
Aon Hewitt projects that women will need 11.5 times their final pay to meet their financial needs in retirement, but finds “a gap of 3.3 times pay between what women need and what they’re actually on track to have saved in order to retire at age 65.” Meanwhile, the disparity between needs and resources is just 2.0 times pay for men.
This shortfall, according to Aon Hewitt, means women, on average, will need to work until age 69—one year longer than men—in order to meet 100 percent of their needs in retirement.
“Women face significant stumbling blocks when it comes to saving enough for retirement, including longer lifespans, lower salaries and a greater likelihood of taking hardship withdrawals from their 401(k)s,” says Virginia Maguire, director of retirement products and solutions at Aon Hewitt, in the aforementioned press release. “Making retirement and financial well-being a priority is paramount for overcoming those challenges.”
The study also finds women and men participating in employer 401(k) plans at the same rate (79 percent), but lower savings rates pair with salary incongruities to further broaden the savings gap. For example, women are, on average, contributing 7.5 percent of their salaries to 401(k)s, which lags more than a full percentage point behind male employees (8.7 percent). In 2015, women had an average plan balance of $71,060, while the average amount for men was $119,150 last year, according to the report.
Naturally, Aon Hewitt suggests ways in which employers can help chip away at the difference, including offering tools such as healthcare and financial market education to improve overall financial well-being, providing professional investment help and adding plan features designed to increase savings rates.
And, even minor tweaks can have a major impact.
“When employers take an active role in helping all workers improve their financial well-being and save more for retirement, women will benefit,” according to Maguire. “Small changes to plan design and an improved focus on day-to-day finances can go a long way to closing the savings gap.”Twitter It!