Plan Sponsors Can Correct Gender-Based Retirement Income Gap

Prudential research indicates that the retirement account balances of female employees are, on average, one-third lower than their male counterparts.

By John Manganaro | June 14, 2017
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Lower retirement account balances, coupled with lower average Social Security benefits and longer life expectancies, mean that women are projected to have much lower income to sustain them throughout retirement than men, according to new research from Prudential.

The analysis frankly lays out the challenges that women in the U.S. face when planning for retirement: Longer life expectancies; the likelihood that many will be single at some point during retirement; time constraints due to roles as workers (both paid and unpaid) and caretakers; lower earnings than men; greater debt at both Millennial and pre-retirement ages than prior generations.

“Women have made significant advances over the last few decades in the workplace,” Prudential explains. “They currently comprise 47% of the U.S. workforce, and 40% of working women are in managerial and professional jobs, compared to just 18% in 1975. Despite these workplace advances, women continue to face a much greater challenge than men when it comes to retiring with lifetime financial security.”

The Prudential data shows fully 25% of women indicate that they don’t think they’ll ever be able to retire, compared to 14% of men. Experts warn that working well beyond the traditional retirement age is generally far less feasible than people anticipate.

When a significant percentage of the workforce isn’t retiring at an expected age, employees’ productivity and organizations’ ability to attract, promote, and retain new talent may be adversely impacted, Prudential warns. The analysis shows a one-year increase in the average retirement age for a given workforce results in an average annual incremental run rate of about 1% to 1.5% of workforce costs.

“This is about half the average annual employer cost of running a defined contribution plan,” researchers note.

Prudential argues that plan sponsors “increasingly have the ability to leverage data to determine when participants are facing important milestones in their lives. The ability to use data to fuel proactive engagement regarding key savings and planning opportunities can also help make closing the gap an achievable reality.”

NEXT: Minding the gap