Gender Gap
While many Americans could be facing a potential retirement savings shortfall, you do not have to dig too far to find research suggesting women, particularly those nearing retirement, might be at a disadvantage. Like all retirement research, data about women are diverse, but general facts and themes have emerged: When compared with men, women live longer, are paid less, hop in and out of the workforce more often, and tend to be more conservative investors.
“On average, their salaries are lower and they’re expected to live a lot longer—so their needs in retirement are expected to be greater than the average man,” says Pamela Hess, Director of Retirement Research at Hewitt Associates. Despite the potential need for more retirement savings, the average woman has less retirement savings than a man and is more conservatively postured, she adds.
A recent Hewitt study of large companies found women accumulated balances of 67% of current pay on average, compared to 80% of current pay for males—indicating that women have saved less in spite of similar age and service patterns between the genders. The study attributes some of this to lower pay and lower savings rates (6.8% for women, 7.8% for men).
Other risk factors women might face include widowhood (the average age is 55, according to the U.S. Census Bureau), or separation from a spouse or partner. “Although a lot of women are in the workforce, we still have a great many women who depend on their husband’s retirement plan for lifetime income,” says Karen Ferguson, Director of the Pension Rights Center, a consumer organization that advocates for retirement security.
Baby Boomer women particularly often have served as caregivers, possibly to both parents and children. “One of the things we find is that women put off planning for retirement and they’re less focused on planning for themselves and the future because they’re taking care of so many generations at the same time,” says Barbara Goodstein, Chief Marketing Officer and Chief Innovation Officer at AXA Equitable.
Leaving the workforce to have children can lead women to not save as consistently or be vested in a workplace plan—taking costly breaks or starting late in the savings cycle, sources note. “They’ve had less opportunity to accumulate retirement savings,” says Christine Marcks, President of Prudential Retirement.
Investing Habits
Generally, research shows that women are less likely than men to invest in equities, be confident in investing, and enjoy investing. For instance, a MassMutual survey of its participants found men enjoy managing their investments more than women and are more confident in their own investment decisions. The research also found women were more likely to become conservative amid the current economy than men. “Women can be less confident in their own investment decisionmaking, which can lead to procrastination,” says Elaine Sarsynski, Executive Vice President of MassMutual’s Retirement Service Division and Chairman and CEO of MassMutual International, LLC.
Although conservative investing might have helped them lose less during the downturn, sources say shying from risk might hurt women in the long term and, especially when it comes to retirement, some statistics suggest women are aware and worried. Although the Employee Benefit Research Institute’s annual retirement confidence survey found male and female workers are equally as likely to save and plan for retirement, the survey revealed that men are more confident than women about retirement. Also, women are more likely to expect to work longer and delay retirement (about 43%, versus 37% for men), according to research from The Hartford.
A nationwide poll of American workers by Prudential Retirement found women are more than twice as likely as men to lack confidence in their ability to make good decisions about their workplace retirement plans, and 38% of women are not confident they’ll be able to save enough money for a comfortable retirement (compared to 22% of men).
How To Help
When you look at all of the previously discussed factors, “you’ve got some challenges ahead of you,” says Catherine Golladay, Vice President, Participant Education, at Charles Schwab. “The silver lining is that individuals are engaged,” she says. “We’re seeing people have more of a focus on savings. I think employers and advisers obviously need to make this work to their advantage.”
Here are some tips sources suggest retirement plan advisers employ to help female participants in clients’ retirement plans:
> Look at the data and understand a plan’s population. Like all demographic groups, the first step is to understand the participant population in order to best serve them (see “Zooming In,” PLANADVISER May-June 2009). “The objective of the adviser is to address the concerns of the demographics of the plans that they work with,” says Ed Fredericks, a financial professional with AXA Advisors based in Westport, Connecticut.
Schwab’s Golladay suggests advisers look at trends in the data for a specific plan in terms of savings rates and account balances. “In different industries, in different geographic regions, I think you’re going to have some differences in the women that are employed by your company and participate in the plan,” she says.
> Have a conversation with the plan sponsor. “If you communicate to a plan sponsor how the needs of women are different, often that’s the first time they’ve ever heard of it,” Fredericks says. Plan sponsors might be tied up with corporate objectives and not notice any different needs, he adds. “If you educate the plan sponsors in terms of the needs of your group and how the dynamics of the group might be different, oftentimes the plan sponsor is going to open up and allow the adviser to…spend more time with the participants.”
One point advisers might want to mention: Women are even more likely than men to rely on the information received from their employer to help make decisions about their workplace retirement plan (50% versus 35% of men), according to Prudential’s research. “Women rely heavily on the education materials they get from their employer as a basis for making decisions,” says Prudential’s Marcks.
Baby Boomer women particularly might need the most help getting access to professional advice or guidance, often to discuss broader financial planning needs beyond the 401(k) plan, Golladay says. Women closer to retirement also could use help from advisers to rebalance portfolios and catch up with their savings, sources say.
> Develop education strategies inclusive of women. When it comes to reaching out to women via education, sources are mixed about whether it is effective to target women directly. Some advisers and retirement plan providers have had success with optional women-focused investment seminars, suggesting that women—particularly in the Baby Boomer generation—might feel more comfortable in a room with other women.
Janet Ganong, Associate Vice President and retirement plan consultant at The Kieckhefer Group at RBC Wealth Management, based in Milwaukee, has offered seminars focused on women (though open to anyone), during which she’ll go over statistics about women’s shortfall in savings and salaries as well as longevity. The message is still the same as it would be with any participants—have a well-diversified portfolio for your risk tolerance and time frame—but hearing statistics about the particular needs of women can make the “light bulb” go off for many women. “Women have become more aware of the need to take care of themselves,” she says.
Even those who are proponents of women-focused seminars normally agree that it is best not to single women out too much to avoid stereotyping—and to keep in mind the particular culture of an organization. “Most of what we have done has not been specifically targeted to women but just in making things a little more targeted when we’re talking to that company,” Golladay says.
Golladay notes one targeting strategy that can work at some employers: advocacy programs. Such programs can leverage influential women in an organization as role models to help other women.
However, not everyone says segmenting women is the best avenue. Liz Davidson, CEO of Financial Finesse, which specializes in educational programs for employee benefits, says singling out women in a seminar “doesn’t get you as far in terms of attendance and appreciation of the workforce as marketing in a way that will naturally appeal to women.” Instead of calling something the Women and Investing Workshop, Davidson suggests that education focus on themes of what people—both men and women—want out of life. “Best practices have shifted to making it about employees’ lives and then backing in the financial concepts,” she says.
Aside from just the group meeting, Fredericks says individual communication after a broader informational group session can be productive. “I think it’s because people—men and women—often are hesitant to ask questions in group settings among their peers. Without individual time, a lot of questions don’t get asked,” he says.
> Use the provider for research and tools. Even if they are not implementing any targeted strategies, providers offer abundant research and awareness of their female participants.
At AXA Equitable, Goodstein has been the champion of a women’s campaign for both retail investors and retirement plan participants. The campaign includes a section of its Web site called Women, Wealth & Wisdom, seminars for women, an iPhone app targeting women, and training and education for advisers. “We thought there was an opportunity here—a demographic that’s growing and powerful,” she says.
Other providers, such as MassMutual and ING, say they can drill down into the data of plans to see what groups, such as women, need more help.
In fact, ING has been working with its plan sponsors to offer more individualized communication and retirement planning seminars to educate population segments in order to improve participation rates. Often, they might find “underserved” areas—such as women and Hispanic participants—“then we will figure out how we can reach those people,” says Catherine Smith, CEO of ING U.S. Retirement Services.
> Motivate women through plan design. The plan design strategies sources suggest could be helpful to women (i.e., automatic features) are the same types of features they suggest for other populations that are lagging in retirement savings, such as younger workers and some minority groups (see “The Young and Restless,” PLANADVISER July-August 2009 and “Lost in Translation,” PLANADVISER January-February 2010). Ganong says she’s a “big proponent of the automatic enroll, automatic increase in plan design”—which can be particularly advantageous in helping women and young people overcome inertia preventing them from saving. Women who are afraid to make a decision might make no decision, she adds.
Despite the great deal of money employers and providers have spent on educating employees, it doesn’t always lead to action, Marcks notes. That’s why she believes the ideal situation is using automatic features to overcome participant inertia, paired with an educational supplement to “help women understand what they’ve been automatically defaulted into.” Prudential’s research found that women are slightly more interested than men in being enrolled automatically (78% of women like the idea of automatic enrollment, compared to 72% of men).
The Pension Rights Center’s Ferguson and other sources list a few more plan design changes employers might consider if they are interested in boosting women’s savings: vesting employees in the plan earlier and basing vesting on an anniversary and not hours worked; providing retirement benefits to part-time workers; and allowing employees to make contributions while on leave. Those changes can be beneficial to women—or men—that take time off to raise a family.
Sarsynski says it is particularly helpful with Baby Boomer women to make sure they understand catch-up contribution allowances for those age 50 and older, which can help women who have been out of the workforce to contribute more. “Advisers and other facilitators and sponsors can help women in particular learn about some of these avenues to be more successful over time,” she says.
She adds that, in addition to helping older women, now is the time to reach out to younger women: “We have to focus not only on tools or support for Baby Boomer women, but also on educating women earlier in their careers.”