Female clients face an uphill retirement battle: Throw them a rope
By Ryan Parker
Bankers Annuity Brokerage
While it should be no great surprise that women don't feel as financially prepared for retirement as their male counterparts do, a new study commissioned by the ING Retirement Research Institute uncovers some truly disturbing realities that may be facing your female clients.
Granted, you can't make your female clients' employers pay them more, but you can use the data discovered in the study “Retirement Revealed” to identify potential points of weakness in their retirement plans, help you better understand where your women clients are coming from and of course, to help craft retirement savings plans unique to your female clients' needs. After all, many of them are either juggling careers with child rearing or doing it alone.
One critical finding of the study is that when it comes to savings — whether in employer-sponsored plans or independent savings vehicles — men have saved a great deal more (a staggering average of $149,000) than women, who have an average of $108,000 in savings. That figure drops appreciably if the woman has two or more children, averaging out at a mere $88,000.
When it comes to retirement savings, one huge factor is how much of their salary individuals contribute to employer-sponsored retirement plans. According to the ING study:
- More women (42 percent) have contributed only 1 percent to 5 percent of their salary into employer-sponsored plans than men (34 percent)
- Fewer women (25 percent) have what they would describe as a formal investment plan to achieve their retirement goals than men, a full one-third of whom have such a plan
- The majority (56 percent) of women don't feel financially prepared for their retirement, while just 42 percent of men feel the same
The harsh reality of biology is that mothers face more challenges when it comes to forging a secure retirement, simply because they generally must spend more time out of the workforce to care for children. This means they face a reduction in both their earnings and savings potential, not to mention lower Social Security benefits.
Further findings include:
- Most mothers (60 percent) don't feel prepared for retirement and 46 percent don't know how to go about meeting their retirement goals
- Just shy of two-thirds of mothers (65 percent) are taking advantage of their employer's full company match, whereas 76 percent of fathers receive their employer's full match
- Just a bit more than half of mothers (53 percent) have less than $25,000 saved in their employer-sponsored retirement plan
Times have certainly changed. In the last 50 years, the percentage of single American women aged 18 or older has more than doubled from 12 percent to 25 percent, according to data from the Pew Research Center. These independent women often struggle with handling daily living expenses and finding the funds to set aside for retirement. Furthermore, the ING study found that:
- A mere 28 percent of single women have calculated how much money they'll need to fund their retirement, compared to 50 percent of men who had done so
- A whopping 69 percent said they counted on their own research or turned to family and friends for financial advice compared to 63 percent of married women
- Twenty-six percent of single women spent “some” or “a lot” of time thinking about retirement, compared to 44 percent of women who were either widowed or divorced
- Single women are also less likely to work with a financial professional (just 21 percent have one) than women who are married, divorced, or widowed (31 percent)
Not surprisingly, the study also found that age and generation played key differences in how women approached their financial and retirement planning, but the statistics remain somewhat sobering among all generations. Consider:
- The majority of women (54 percent) aged 50–64 haven't taken the time to calculate how much money they'll need to maintain their current lifestyle after retirement
- Gen Y women (aged 25–34) are most likely to have “barriers to saving” at a whopping 86 percent, compared to 74 percent of women 35 and older
- Fifty-six percent of Gen Y women are still paying off student loans
- Just 33 percent of women between the ages of 50 and 64 have a formal investment plan in place to guide them toward their retirement goals
- While 47 percent of Gen Y women spend most of their extra money on entertainment or vacations, a mere 6 percent put anything toward retirement savings