Women not only lag behind men when it comes to equality in pay, but they're also handicapped in saving for retirement and in retirement itself.
That's according to a TIAA white paper, which explores the unique handicaps women face not only in saving for retirement, but also for actually surviving financially once they've left the workplace.
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The paper also suggests strategies that plan sponsors can employ to help their female employees achieve better retirement outcomes.
Among the paper's findings is the fact that women need to save nearly twice as much as men—not just because women's average pay is so much lower than men's (women earn 78 cents on the dollar compared with men), but also because women spend on average fewer years in the workplace and are more risk averse than men in choosing investments.
As an example, for two college graduates, one male and one female, to save the same amount of money for retirement, the man would need to save 10 percent while the woman would have to save 18 percent—an additional $667 per month out of annual gross pay of $100,000. But even that additional savings level isn't enough to sustain women throughout retirement.
Retirement plans offering a one-size-fits-all qualified default investment alternative (QDIA) don't account for any of these differences—saving rates, investment choices and retirement spending strategies don't take into account the shorter amount of time that women will spend in the workplace compared with men (men work an average of 38 years, while women work an average of 29 years when absences due to childcare or eldercare take them away from their jobs).
Nor do they compensate for women's lower salaries or their greater aversion to risk—or indeed for women's longer lifespans and the greater likelihood that they will have to spend considerably more for medical care in retirement.
That means that a QDIA that works for a male employee might not do anywhere near as well for a female employee.
"[O]utside of their retirement accounts, women tend to hold considerably safer assets, such as cash and money market funds, whereas men tend to hold more stocks, mutual funds and exchange-traded funds," the study said, adding, "This is important because many households have a lot of assets that are not tax deferred. With this difference in risk preferences or mix of investments, women will almost certainly underperform over long periods of time, resulting in smaller retirement balances."
The paper suggests that employers can provide better employee education—including gender-specific materials—and a push for a higher contribution rate.
In addition, it says that a QDIA with higher levels of risk and the offer of guaranteed lifetime income in the plan could provide better outcomes for women.
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