Data & Research August 20, 2020

GAO Finds Women Anxious About Retirement Security

It reports one of the big issues is that women are overrepresented in low wage professions.

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In a report to the U.S. Senate’s Special Committee on Aging, “Older Women Report Facing a Financially Uncertain Future,” the Government Accountability Office (GAO) outlined numerous obstacles women face when trying to save for retirement.

GAO based its findings on 14 focus groups it held in rural and urban areas, primarily among women age 70 and older, as well as the 2019 Current Population Survey; the Health and Retirement Study, which is based on data from 2002 to 2014; and the 2016 Survey of Consumer Finances. The report was requested by Sen. Susan Collins, R-Maine, chairman of the Senate Special Committee on Aging, and Sen. Bob Casey, D-Pennsylvania, a ranking member of the committee. The two senators note that in 2018, the national poverty rate for women ages 65 and older was 11.1%, compared with 8.1% for men in the same age group.

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Many of the women in the focus groups expressed concerns about the future of Social Security and Medicare, and the cost of health care and housing in retirement. They also cited divorce, being forced to leave the workforce earlier than planned and a lack of financial education as obstacles to their retirement. GAO also noted that women are paid less than men, live longer, are more likely to work in low wage professions and often leave the workforce to raise children or to serve as the caregiver to older family members.

GAO earlier reported that women 65 and older have less retirement income than men and are nearly twice as likely as men to be living in poverty. GAO said unmarried women are at a greater risk of poverty in old age. Women who never married cannot take advantage of some federal benefits conferred through marriage, such as Social Security spousal and survivor benefits.

When asked to define what being independent in retirement meant to them, the women in the focus groups said being able to meet essential expenses and not having to scrutinize every purchase. They also said it is the ability to be able to afford other things, beyond the essentials. Some of the women said it is not having to worry about the future or rely on others to support them financially.

Women in eight of the focus groups shared their fears about potentially needing to cover the cost of long-term care, with the majority not having insurance to cover such a cost.

Women in most of the focus groups said they wished personal finance education was taught in schools, starting in kindergarten and continuing through college. They also said they thought employers should provide financial planning sessions for their employees. Many of the women also said they do not understand Social Security and Medicare.

Women who sought professional advice in making financial decisions said that the results of the advice they received were mixed. Those dissatisfied with the advice said it was faulty, came at a high cost or subjected them to financial fraud.

 A study from Merrill Lynch, in partnership with Age Wave, suggests that the financial industry, employers and policymakers, among others, can make an impact when it comes to giving financial advice by respecting women’s different life journeys and longer life spans, acknowledging they are not all the same, encouraging financial discussions, facilitating financial education and confidence, and demanding equality in pay and promotions. And Lincoln Financial says being educated and working with a professional adviser is the best route for many Americans, including women, in order to receive the support and advice they need to maintain their lifestyle in retirement.

Women who filled out a written questionnaire for the GAO study were asked what advice they would give younger women with respect to preparing for retirement. The most commonly mentioned actions, in order of times cited, were: save, invest, seek financial advice and/or education and be frugal to keep debt low.

In more than half of the focus groups, the women said they experienced pay inequality during their careers.

GAO found that nearly 40% of households with older women had less than $5,000 in checking and savings accounts in 2016, and 20% had less than $1,000. “Most women have less income to maintain their living standards in retirement than they did when they were working, and, on average, they increasingly rely on Social Security as their main source of income,” GAO says.

Collins said, “As the chairman of the Senate Aging Committee, ensuring that more people are better prepared for retirement is one of my top priorities. Improving women’s retirement security is a significant public policy challenge that requires us to work together to find common ground. After spending years in the workforce and caring for loved ones, women should be able to enter retirement with the confidence that they will be able to live comfortably and maintain their independence as they age.”

Earlier, Collins and Casey authored the Older Americans Act, which includes a provision requiring the continued operations of the National Resource Center for Women and Retirement, which provides retirement planning and other educational tools.

Women are less financially prepared than men, according to the fifth annual Advisor Authority study commissioned by Nationwide Advisory Solutions and conducted online by The Harris Poll. And, while women more commonly had an optimistic financial outlook last year (56% versus 53%), they were less likely to be optimistic than men about the U.S. stock market (36% versus 50%) and the U.S. economy (35% versus 48%).

Client Service August 20, 2020

15th Anniversary of RPAY: James Worrell

James Worrell has seen his team expand with more members, assets under management and a new service model since he won the Retirement Plan Adviser of the Year award in 2011.

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Since winning the 2011 PLANSPONSOR Retirement Plan Adviser of the Year award, James Worrell, who was then, president of GPS Investment Advisors in Providence, Rhode Island, has seen his practice experience exponential growth. In 2015, he co-founded Strategic Retirement Partners (SRP), and since 2011, Worrell’s team has doubled to a total of eight. Assets have quadrupled to $2.2 billion, and plan count has increased 60% to 72. Back in 2011, GPS Investment Advisors served only 45 plans.

The practice has continued to serve all plan types, including pension plans, 457 and 401(a) plans, and nonqualified plans, although Worrell and his team primarily concentrate on 401(k) and 403(b) plans.

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As to how the service model has changed in the past nine years, Worrell says that, “In the time since I won the award in 2011, I co-founded Strategic Retirement Partners, so we now have a presence in 20 locations across the country, with roughly 80 associates dedicated to retirement plan consulting. Our activities are more specialized, systematic and consistent. Having subject matter experts within SRP allows me and others within SRP to focus more narrowly where each individual team member’s expertise can add the most value to clients.”

For instance, team members can focus on employee stock ownership plans (ESOPs), defined benefit (DB) and cash balance plans. They also can help plan sponsor clients run specialized committees, such as the investment, participant engagement, marketing, consulting and risk committees, Worrell says.

As to how the retirement plan industry has changed these past few years, Worrell says, “We now serve clients and their employees in a wide variety of ways that address ‘financial wellness’ within one relationship. Consulting firms have continued to grow more specialized and larger. We have also become, as an industry, better partners to our clients—deepening our relationships with an ability to help them holistically address their benefit and participant experience.”

Worrell says he greatly enjoys working in this industry. “I love our industry, and the opportunity we have to help people by improving their plans and financial lives,” he says. “There is still plenty of room for improving access [to retirement plans], participation, savings rates and investment allocations.”

While he says he believes there is still a lot of work at hand for retirement plan advisers to help sponsors and participants achieve their goals, Worrell calls this challenge “energizing” and characterizes the role of retirement plan advisers as “change agents” responsible for “improving the lives of hundreds of millions of American workers.”

Worrell says it is critical that financial wellness programs broadly address all financial goals and challenges, pointing out that there are tens of millions of Americans saddled with an average of $37,000 in student loan debt and that many Americans will have to grapple with the rising cost of health insurance in retirement. “Holistic financial wellness programs must be front and center,” Worrell maintains.

He says working for the past five months during the coronavirus pandemic “has been very difficult for clients and, of course, for us as advisers, too.” However, he adds, SRP was able to seamlessly transition its employees to work remotely from home because the practice had set up this infrastructure in 2015, along with a well-defined business continuity plan (BCP).

In addition, he stresses, he has experienced several market crises before, and this perspective has helped him advise sponsors and participants on staying the course in the markets despite the market volatility.

However, Worrell is quick to note, what the world is experiencing now with the pandemic has never occurred before. “With the economy grinding to a halt and historic market volatility ensuing due to the pandemic—this is something we have never before seen,” he says. In response, SRP has made itself more available than ever before to consult with participants and sponsors via video conferences, Worrell says. “I encouraged employees to be there for our clients in this time of need,” he adds. He has also made it a point to check in with each of his employees individually to find out what they might need for support.

At internal meetings with his team, Worrell asks them to talk about something positive in their lives for which they are grateful. “Hearing each of our colleagues relate positive stories resonates and inspires us and sets a great tone,” Worrell says. He says it is critical for retirement plan practices to set an example as leaders, for that will “define us, our organizations and our client relationships for years to come.” Despite the challenges facing businesses right now, Worrell maintains, “we are strengthening relationships with clients and partners by supporting them now.”

As to what types of new conversations SRP is having with clients now, Worrell says he and his team are spending a great deal of time consulting with clients on the Coronavirus Aid, Relief and Economic Security (CARES) Act provisions and going over data from their recordkeepers on COVID-19-related loans and withdrawals their participants are taking from their 401(k) accounts.

Finally, as to what retirement plan advisers can do to improve participants’ retirement readiness, Worrell says, “That is a huge question. This is our sole focus and purpose every day, so I could go on for hours, but in a nutshell: Leverage our expertise in behavioral economics and plan design to create the best environment and conditions for success. We must bring every bit of experience, expertise, statistics, anecdotes and empirical evidence to the table to help our clients get their participants to those successful outcomes.”

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