Financial Planning Tackles Gender Savings Gap

While a financial plan benefits all employees, women face unique challenges

Stephen Miller, CEBS By Stephen Miller, CEBS March 10, 2016

Women remain far more likely than men to face financial hardship in retirement, several new studies show. The findings point out the importance of helping employees—and women in particular—to understand their financial situation and put together a plan for budgeting and saving for retirement.

The nonprofit National Institute on Retirement Security (NIRS) report, Shortchanged in Retirement: The Continuing Challenges to Women’s Financial Future, published in March, reveals that:

  • Women are 80 percent more likely than men to be impoverished at age 65 and older.
  • Women ages 75 to 79 are three times more likely than men to be living in poverty.

While women were somewhat more likely than men to work for employers that offered retirement plans, there is a gap in eligibility that limits women’s participation in these plans. Women’s higher rates of part-time employment and shorter job tenure may make it more difficult for them than it is for men to meet employers’ eligibility requirements for retirement plans, the study found.

Longer Lives, Lower Savings

“It is well-documented that the nation faces a retirement savings crisis, but the pain is particularly severe for women because we need a bigger retirement nest egg than men, thanks to our longer life expectancy,” said Diane Oakley, NIRS executive director and report co-author. She noted that in 2014 the median amount accumulated in 401(k) and similar defined contribution retirement plan accounts was $36,875 for men and $24,446 for women—or 34 percent less, according to data from investment firm Vanguard.

“As women continue to lag behind men in terms of saving and planning for retirement, it is even more concerning that women statistically tend to live longer than men, thereby implying an even greater need for savings and preparations,” said Catherine Collinson, president of the nonprofit Transamerica Center for Retirement Studies (TCRS), which recently released 14 Facts About Women’s Retirement Outlook.

“A woman’s path to a secure retirement is filled with obstacles, such as lower pay and time out of the workforce for parenting or caregiving, which can negatively impact her own long-term financial prospects,” Collinson observed. TCRS found that:

  • Of those currently participating in their employers’ plans, women contribute 7 percent (median) of their annual salary vs. men’s 8 percent (median).
  • Looking at the average, women contribute 10.1 percent vs. men’s 10.7 percent.

Overcoming Debt

“Many employees are challenged in overcoming significant obstacles like debt and managing competing financial priorities,” said Liz Davidson, CEO of financial-education provider Financial Finesse in El Segundo, Calif. The firm’s Year in Review: 2015 study highlights the gender gap in financial understanding and preparedness.

Financial Gender Gap




I pay my bills on time each month



I have a general knowledge of stocks, bonds and mutual funds



I have a handle on my cash flow so I spend less than I make each month



I am comfortable with the amount of (nonmortgage) debt I have



I have an emergency fund to pay bills for a few months if I lose my job



I know I am on target to replace at least 80% of my income in retirement



Source: Financial Finesse
Findings are based on 69,412 financial wellness assessments completed from 2011 through 2015.

Debt counseling—whether provided by an independent financial planner, through an employee assistance program or as a service within an employee wellness program—is a central part of securing an employee’s financial outlook, said Carla Dearing, CEO of financial advisory firm SUM180 in Louisville, Ky., and CEO of Vibrant Nation, an online community of women age 45 and older.

“Effective counseling often starts by helping employees to clean up their credit cards, because that waterfall of debt is the absolute enemy of savings,” she added. “Helping employees to live within a budget and to make a financial plan can take away the stigma and stress” associated with financial uncertainty.

Getting Personal with Advice

Person-to-person coaching, with technology playing a supporting role, can help narrow the financial gender gap, the Financial Finesse study found. While technology, such as online retirement planners and so-called robo-advisors, can help increase employee awareness of their financial vulnerabilities, online interactions alone did not improve employee financial wellness. By contrast, employees who had five interactions—including conversations on the phone or in person—with a certified financial planner showed substantial progress.

“Since online tools are here to stay, we need to make sure they are both accessible and accurate,” said Dearing. “Women, we’ve learned through our work with Vibrant Nation, prefer to research topics they are uncomfortable with on their own and gain a basic understanding of their options before reaching out to friends and, later, advisors to move forward on next steps,” she noted. But “even with the most user-friendly software, money issues are emotional and there are always intangibles to consider in deciding what to do next. The best human advisors will gather all your information and then explore choices with you.” Thus, “combining the benefits of online advice with human advice delivers the best of both.”

Viewing the ‘Big Picture’

Financial stress “is very much tied to having a plan, and it’s very addressable,” Dearing added. She advocates employer-sponsored resources that go beyond providing investment advice, and offering “big-picture” financial planning help. As an example, she recently met with a 55-year-old woman who was extremely concerned about her situation.

“She did have quite a bit more saving to do. But she also was in her peak earning years,” Dearing recalled. “Just by seeing the numbers, she realized that an additional five years at this peak earning level got her in range for what she’s going to need when she’s around 67. Doing the calculations, having a conversation about those numbers, taking a moment and accessing the full picture, and stepping back and showing ‘Here’s what the total looks like, and here’s how it’s likely to grow’—those are very significant steps.”

Employers, as a trusted resource, “are well-positioned to help workers understand that larger picture” by providing access to financial planning tools and advice, Dearing said. “They can make a difference.”

Financial Stress Hits Job Performance

Financial worries, which are strongly linked to stress, ultimately have an impact on employees’ ability to perform their best work, regardless of gender, new research findings by consultancy Willis Towers Watson indicate. The firm’s 2015 Global Benefits Attitudes Survey of over 30,000 private sector employees showed that:

28 percent of workers who are struggling with their finances said it prevents them doing their best at work.

Employees who are not worried about their finances reported they took an average of 1.9 absence days from work per year, but employees struggling financially were absent for an average of 3.5 days per year.

“Employers are in an excellent position to help employees achieve both retirement and financial security in the short and long term as well as reinforce good personal financial habits by providing tools, resources, and benefit and total rewards programs that best meet their employees’ needs,” said Shane Bartling, a senior retirement consultant at Willis Towers Watson in San Francisco.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.

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