What the WNBA teaches us about the need for retirement equality for women
The alarming pay gap between WNBA and NBA basketball players offers a glimpse into the 30% retirement income gap between men and women – and TIAA sheds light on how plan sponsors can best reach women participants.
Women’s basketball has exploded with the spotlight shining brightly on WNBA-newcomers like Caitlin Clark and Angel Reese. However, despite their immense talent and growing popularity of the women’s basketball league, the glaring disparity in earnings between male and female athletes persists – leading to a huge gap in retirement savings.
Together with some of the most influential professional women’s athletes across the sports world, financial services firm TIAA shed light on the fact that women have, on average, 30% less income in retirement than men. Women also generally live longer than men; and while a recent TIAA Institute study found that women typically have a better grasp of longevity literacy, they may not make the connection to how this impacts the need for more money in retirement.
Outside of the sports world, plan sponsors can play a pivotal role in improving retirement outcomes for their female employees, who earn less than men, often take time away from work for caregiving and live longer. Women face an uphill battle when it comes to retirement, so we talked to Shelly-Ann Eweka, senior director of the TIAA Institute, to learn how plan sponsors can best reach their women participants, and the role they play in ensuring they retire with dignity.
Q: How can plan sponsors play a pivotal role in improving retirement outcomes for their female employees?
A: Plan sponsors can ensure that female employees have access to financial advice. We need to normalize working with a financial professional the same way it is normal to go to a doctor. Understanding the unique obstacles women can face when saving for retirement is a step in the right direction. The wage gap between men and women is probably the biggest stumbling block, as TIAA pointed out in a recent campaign. 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.
Several other contributing factors, such as divorce or widowhood, student debt (women hold almost 2/3 of the country’s $1.54-trillion student debt) and caregiving can also hinder a woman’s retirement readiness. Nearly 30% of family caregivers reported having stopped saving and more than 20% used up their personal short-term savings as a result of caregiving, according to a recent TIAA Institute study. Since women are the primary caregivers in most families, according to the National Alliance for Caregiving, they’re most likely to take this kind of financial hit.
These are all issues plan sponsors should consider, especially since women tend to live longer than men, meaning they could live in retirement for a longer period.
Q: How can plan sponsors provide women participants with tailored financial education that highlights pay disparities and the impact of longevity on their retirement?
A: The most important thing is to know your audience. Workforce populations tend to mirror society, so employers should consider the diverse experiences of their employees and design plans that address their needs. Also, financial terms and phrases can be confusing, so communications – digital, printed or verbal – should be clear, understandable, and jargon-free. It’s about meeting people where they are and recognizing that most are not financial or retirement experts. Also, provide access to financial professionals when it is convenient for the employee. If they work a night shift, professionals should be available to meet them during those working hours.
Q: How can plan sponsors build a plan that includes the option for lifetime income in retirement to reduce the stress women may feel about running out of money in that stage of life?
A: One of the most important steps a plan sponsor can take is to add lifetime income to their default. As the default, there’s no action for participants to take. It’s automatic. Including a lifetime income option can give women the opportunity to contribute throughout their working careers without really thinking about it. And they’ll reap the benefits at retirement, when they have the option, but not the obligation to convert that savings into steady income in retirement that cannot be outlived. This is crucial for women because they tend to live longer than men, according to the U.S. Centers for Disease Control and Prevention. The average life expectancy at birth for women is 80.2 years compared to 74.8 for men.
Related: Retirement crisis is coming: Women say Congress, employers should do more
Q: How key is it to incorporate auto-enrollment and auto-escalation features to set participants up for success earlier in their careers, even while they may be uncertain of their retirement goals?
A: Auto-enrollment and auto-escalation are the “easy buttons.” The participants take no action to enroll, and the contribution increases are automatic, so the participant does nothing. As a result, even if they’re unsure of their retirement goals, auto-enrolled women with auto-escalation will be saving for their entire careers just because their employers flipped a switch. Starting earlier in their careers gives women more time to save using the power of compound interest, which can make a huge difference.
Also, auto-enroll with auto-escalation creates a less drastic, gradual approach to saving – participants may not even notice a difference in their take-home pay.