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WOMEN & RETIREMENT SECURITY
Navigating the Financial Vortex
December 7, 2022 | 10 Minute Read
Introduction
Women and Retirement Planning
This year’s Retirement Survey & Insights Report, Navigating the Financial Vortex: From Retirement Readiness to Retirement Income, highlighted the challenges that working and retired individuals face as they save and invest for their retirement, especially in today's environment. The report shared detailed insights on prominent retirement trends experienced by generation and outlined potential difficulties these age groups may face on their retirement journey.
In this supplemental report titled Women & Retirement Security, we take a deeper look at the gender differences from both working and retired Americans to better understand the challenges women face on their retirement journey.
There are many headwinds that are unique to women saving and preparing for retirement. While women they control one third of total US household financial assets ($10.9 trillion)1 and comprise 47% of the workforce,2 they earn 21% lower lifetime income than men.3 Part of this disparity is due to women on average having nine years’ less earned income, which affects their Social Security benefit.4 The impact of these factors are reflected in women's retirement contributions, which on average are 30% less than men.5 Women must also navigate the added complexity of longer life expectancy and need to plan for their savings to last longer, putting more pressure on retirement finances.
The obstacles women face are opportunities for plan sponsors to offer solutions that meet them where they are on their retirement savings journey. Personalized education and advisory services from a solutions provider can help support the unique factors affecting women. Additionally, data-driven engagement, segmented by participant sub-populations such as gender, can further address specific hurdles. This type of engagement strategy not only increases awareness amongst investors but can also provide them with actionable steps to get and stay on track for retirement.
Building the Retirement Survey
Methodology and Respondents
We evaluate survey responses from both working and retired Americans to understand the realities of preparing for and living in retirement. Our goal is to learn about the financial obstacles individuals need to overcome and the lessons they can apply. Women & Retirement Security includes key findings that we hope will help plan advisors and plan sponsors offer programs that better prepare women for a secure retirement.
Our findings are from 1,566 individuals surveyed in July and August 2022 and provide insights from a diverse set of perspectives, including (i) working individuals (967 working individuals across generations—working Baby Boomers, Generation X, Millennials, and Generation Z), (ii) retired individuals (599 retired individuals age 50-75) and (iii) gender and generational breakdowns for both populations.
Key Survey Findings
Women and Retirement
RETIRED WOMEN REPORT RECEIVING LESS THAN 70% OF THEIR PRE-RETIREMENT INCOME IN RETIREMENT
Eight in ten retired women report their total annual income is less than 70% of their pre-retirement income.
Having access to a plan that provides personalized guidance on savings and investment strategy that can adjust and recalibrate through life events can help individuals better reach retirement with sufficient savings to maintain their standard of living.
THE FINANCIAL VORTEX HAS GREATER IMPACT ON WOMEN’S ABILITY TO SAVE FOR RETIREMENT
The women’s retirement savings are impacted more than men across all competing financial factors evaluated.
The financial vortex is a combination of competing financial priorities, life events and planning assumptions. Though women juggle the same types of financial responsibilities as men, more women report that these factors impact their ability to save for retirement.
WOMEN ARE MORE LIKELY TO RETIRE EARLIER THAN PLANNED
More than 60% of women stated that they retired earlier than planned and 66% retired for reasons outside their control.
Not reaching one’s desired retirement age reduces the amount of time available to save for retirement and can place added pressure on those savings to last longer than expected. The majority of women respondents faced this risk and are more likely than men respondents to retire early because of external factors like health and taking care of a family member.
WOMEN ARE MORE LIKELY TO MANAGE THEIR OWN SAVINGS
Despite concerns about their ability to manage retirement savings, 69% of women use a self-directed approach.
Women report they are anxious and concerned about their ability to save for retirement, yet almost 70% of women respondents manage their own savings. This does not reflect their desire for help and advice, which is higher than reported by men.
At a Glance
By the Numbers
Women face unique challenges that can complicate their retirement planning journey. A look at the data shows that they are more likely to have taken time away from the workforce, more likely to have retired earlier than planned due to unexpected reasons, and often choose to manage their finances themselves.
Digesting the Data
Women and Retirement Security
Take a closer look at the myriad ways that women differ from men in terms of their retirement journeys.
Conclusion
Helping Women Navigate the Financial Vortex
Women Face a Unique Set of Circumstances That Can Exacerbate the Effects of the Financial Vortex
Lower lifetime earnings, greater caregiving needs and time out of the workforce, all result in a broader impact of competing financial responsibilities leading to lower retirement savings and Social Security benefits. In addition, since women on average have longer lifetime expectancy, there is more concern about having sufficient savings given a longer retirement than men.
Less Confidence in their Ability to Manage their Savings
Women report more concern and higher levels of stress managing their retirement savings. Additionally, they report lower levels of confidence in their ability to manage them effectively. Plan sponsors have an opportunity to increase financial literacy and resilience, to build confidence in employees’ ability to make decisions about their retirement finances.
Focused on the Fundamental Needs to Meet Retirement Goals
Having sufficient savings, knowing when to adjust saving strategy to stay on track, and knowing how long savings will last are top concerns for women. While these are common challenges, they are also very personal. The challenge to plan sponsors is to consider well-designed personalized savings and investing offerings that ensure adjustments are aligned with individual goals.
More Women Manage Savings on their Own, Yet Have a Strong Desire for Guidance and Advice
Despite greater concern over their ability, women are more likely to manage their savings on their own and less likely to leverage educational and advice resources. The appetite for education and advice, however, is stronger for women than men. The difference in utilization of these resources highlights the importance of financial education and specific programs that can address unique needs and challenges.
Important Role of the Employer
As we saw in our Retirement Survey & Insights Report 2022, the importance of financial education and advice is clear, and financial advisors are often regarded as the most important source for it. For women, however, family members and employer-sponsored retirement plans are reported as top sources of financial help. The value of trust and connection cannot be understated in retirement planning. Plan sponsors can provide retirement planning resources around caregiving, leaving the workforce, income generation in retirement and more by offering services that support retirement savers based on their unique situation.
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Navigating the Financial Vortex: Women & Retirement Security
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