Keeping it real: 3 action plans to help women close the retirement gap

Who is the role model for women saving for retirement that most people have never heard of? Genevieve Via Cava.

A former special education teacher who died at 89, Via Cava unexpectedly left a tremendous estate that included $1 million to fund college scholarships for the very students she had worked with for 45 years.

Her story is inspiring twice over. First, for her devotion to students with learning disabilities. And second, for her ability to save so much for retirement despite her modest background.

Genevieve’s ability to leave such a generous legacy shocked friends and family members because of her modest means and famously frugal lifestyle. Her story is remarkable.

It’s also atypical.

Unfortunately, most women don’t retire with a nest egg like hers.

Fortunately, plan sponsors can help women close the savings gap and get on the right track to retire with confidence. Where to start? Plan design, educational materials, and employee outreach should reflect the needs and challenges that women face. As you do, keep the following things in mind about women, as compared to their male counterparts.

#1: Women retire with a 30% smaller nest egg

On average, women earn 83 cents on the dollar compared to men; for a young woman at the beginning of a 40-year career, this can add up to a loss of $400,000 or more because of the wage gap.

Plan sponsors can take action to help women by auto-enrollment and auto-escalation features to help all employees set foot on the path to retirement and enable them to meet their goals. Automation within the plan is crucial for those who are unfamiliar with retirement plans or are uncertain of the best ways to save for retirement. The best part is that these features improve retirement for all employees who are at risk of falling short.

#2: Women tend to live longer than men

A recent TIAA Institute study with the Global Financial Literacy Excellence Center found that women generally have a better grasp of how long they live than men do (73% vs. 79% according to 2021 statistics from the Centers for Disease Control), yet they may not make the connection to how this affects retirement outcomes or — more importantly — what they can do about it.

How can plan sponsors help? For one thing, they can help build a plan to include a default investment option that provides the option (not the obligation) for lifetime income at retirement. Not only does this empower women to retire with confidence, but it reduces the stress of uncertainty in retirement during the working years.

On top of this, a robust education program for near retirees will help them address key concerns that accompany a longer life span: how (and when) to claim Social Security and Medicare benefits, long-term care insurance and other options, and steps they can take to protect against the risks associated with cognitive decline. Plan sponsors can find more information on action plans for sponsors on this free resource from the Defined Contribution Institutional Investment Association dedicated to “Retirement Wellness.”

#3: Women face additional barriers to savings due to life circumstances

For example, a divorce can wreck the finances of women and leave them with less income, making it more difficult to save for retirement. In many cases, this comes after years spent of unpaid work, including raising children and caring for elderly family members. The list goes on.

As a plan sponsor, it’s important to understand the diverse life experiences within your participant population. Listen to their needs and ensure that plan education materials address them. Let’s not forget that the challenges outlined here for “average” women may apply more acutely to women of color — or participants of any underrepresented group.

Inclusive, accessible language is the cornerstone of making the plan work for all participants. Financial jargon in plan materials can confuse anybody, regardless of gender.

Related: Women identify as ‘novice’ investors: Closing the gender retirement gap

Best practices start with knowing your audience: Understand the financial literacy of your participants and meet them where they are. Simple language and explanations that leave out the jargon — and condescension — are key. Everyday kitchen-table terms reach the broadest audiences and help them connect the dots when they know about a concept but are unfamiliar with the formal terminology.

A retirement plan may be the only place where many workers have access to a structured savings plan and guidance. This underscores the importance of combining auto-enrollment and auto-escalation with an embedded lifetime income solution – which gives workers the option to replace their paychecks in retirement – as a default investment.

No magic pill can fix the retirement savings gap, of course. But plan sponsors can make headway by considering the facts and implementing focused strategies that consider the range of life circumstances and backgrounds of their participants.

Let Genevieve Via Cava serve as an example of what women can achieve in the workplace. With a thoughtful approach and plan design, plan sponsors can make the difference in empowering more women to get on track to reach retirement with confidence.

Tamiko Toland is managing director, lifetime income strategy and market intelligence at TIAA.