Addressing the Retirement Security Risks of Women

“The key thing is women have made so much progress in the workforce and their careers, but their retirement outlook is still not catching up,” Catherine Collinson, president of the Transamerica Center for Retirement Studies in Los Angeles, tells PLANSPONSOR. “Only 7% of women are ‘very confident’ in their ability to fully retire with a comfortable lifestyle. We can do better than that.”

Based on select findings from the 14th Annual Transamerica Retirement Survey of Workers, the Center came up with “Fourteen Facts” that highlight specific areas of opportunity for women to improve their retirement outlooks. It also outlines some of the underlying reasons women are at greater risk than men of not achieving a secure retirement.

The “Fourteen Facts” about women’s retirement outlook are:

• Only 7% of women are “very confident” in their ability to fully retire with a comfortable lifestyle;
• Forty-three percent of women expect to work past age 70 or do not plan to retire;
• More than half (52%) plan to work after they retire;
• Most (65%) Baby Boomer women do not have a backup plan if forced into retirement sooner than expected;
• Fifty-three percent expect to self-fund their retirement through 401(k)s or similar accounts or other savings and investments;
• Of women who have or plan to take time out of the workforce to be a caregiver, 74% believe it will negatively impact their ability to save for retirement;
• Forty-five percent of women work part-time so are less likely to have workplace retirement benefits;
• Sixty-one percent of women are offered a 401(k) or similar plan;
• Seventy-five percent of women who are offered an employee-funded plan participate in the plan;
• Six percent is the median contribution of women who participate in their employer’s plan;
• Fifty-five percent of women are saving for retirement outside of work in an IRA, mutual fund, bank account, etc.;
• The majority (59%) of women who estimate their financial need guess what their retirement savings needs would be rather than using a calculator or adviser;
• Only 35% of women use a professional financial adviser, most (79%) do so for retirement investment recommendations; and
• Many women (53%) want information that is easier to understand.

Collinson points out a few takeaways for plan sponsors. Women are more likely to work part-time than men, yet many employers do not extend retirement plan eligibility to part-time workers. Doing so could help women. In addition, since women are more likely to move in and out of the workforce, plan sponsors can shorten plan eligibility periods to help them get into plans sooner.

According to Collinson, one fact that is not in the report is only 18% of women are aware of the Saver’s Credit they can get for retirement savings when they file their taxes, compared to 29% of men. Women continue to earn less than men, so they are more likely to be eligible for the Saver’s Credit, but less likely to be aware. Employers should promote the availability of the Saver’s Credit for all workers.

Collinson also noted, “When we ask women what would motivate them to learn more about saving for retirement, many say they would like a good starting point or education that is easy to understand. Plan sponsors can review their education and measure whether all participants are getting value from it.”

Collinson suggests plan sponsors continue to look at their plan designs and ways to improve savings rates for all workers. Consider auto enrollment, but at a 6% deferral rate instead of the more common 3%; consider automatic deferral increases, and consider restructuring match formulas to drive up savings rates.

“Women can create their own retirement destinies with the help of plan sponsors, providers and advisers,” Collinson concludes. “In many cases, it’s a matter of just getting started.”