There’s a Gender Gap in Retirement Readiness

At a time when employees are worried about retirement savings, new research indicates that female workers are faring even worse.

Research from the Nationwide Retirement Institute (NRI) reveals a gender disparity in retirement confidence and readiness among current U.S. workplace savers as more women than men report challenges.

NRI’s survey of 1,200 employer-sponsored retirement plan participants found that 1 in 4 women (23 percent) feel they’re “on the wrong track” for retirement, versus 15 percent of men. Additionally, 41 percent of women hold a negative or neutral outlook on their retirement planning, compared to just 29 percent of men. This gender disparity is further demonstrated by the fact that women are less likely than men to have reached key savings milestones such as saving enough for an emergency fund or adjusting their retirement investment allocations.

Although women are participating in employer-sponsored retirement plans alongside their male counterparts, they’re “facing a variety of challenges that can make navigating their retirement journey more complex," said Cathy Marasco, leader of protected retirement for Nationwide Retirement Solutions.

Women live longer, take gaps of leave from work to care for children more often than men and generally are paid less than men. This all contributes to the problem.

"Women are likely to live longer in retirement, so it’s understandable that fear of outliving their income would be a source of anxiety,” Marasco said. “The good news is: There are new solutions available for employers to help plan participants address concerns about income in retirement."

A complicated economic environment is also contributing to the problem: The report found that women are more likely to be concerned about a recession or economic downturn and the impacts of rising costs or market volatility on their retirement savings. As a result, half of women are concerned about outliving their income in retirement (52 percent). However, just 13 percent have diversified their investment portfolio, and only 15 percent have looked for other investment options that offer protection during economic uncertainty.

Meanwhile, 60 percent of female savers are determining how long they will need their retirement savings to last, and only 11 percent have created a plan to convert their savings into income in retirement.  They also have other common concerns about their money, including the cost of health care (69 percent), Social Security not being there when they’re ready to retire (68 percent), and being able to manage expenses and lifestyle choices during retirement (52 percent). 

Retirement Woes

Nationwide’s survey is the latest report to point out retirement woes and discrepancies felt by employees—news that indicates employers might want to step up efforts to help.

Another survey published earlier this month by Northwestern Mutual found that employees’ “magic number” for retirement has surged to an all-time high, even though savings have remained low. On average, U.S. adults now believe they will need $1.46 million to retire comfortably, a 15 percent jump over the $1.27 million reported last year and a whopping 53 percent surge from the $951,000 target they reported in 2020. The average amount that U.S. adults have saved for retirement is just $88,400, according to Northwestern Mutual’s survey of 4,588 U.S. adults—slightly lower than the $89,300 average in 2023 and much lower than the five-year peak of $98,800 in 2021.

Meanwhile, in 2023, workers’ and retirees’ confidence in having enough money to live comfortably throughout retirement fell to the lowest rate since the Great Recession, dropping to 64 percent from 73 percent in 2022 among workers and to 73 percent from 77 percent in 2022 among retirees, according to data from the Employee Benefit Research Institute (EBRI) and Greenwald Research.

Sky-high inflation, the pandemic and other issues have caused a significant number of employees to turn to their 401(k)s for funds, with nearly one-third of workers (30 percent) tapping into their retirement savings over the previous 12 months to pay for short-term expenses, according to a Betterment at Work survey released in December 2023.

And another EBRI report indicated that health care in retirement is also a growing issue, because just 3 percent of private-sector companies were still offering health care plans that supplement Medicare for eligible retirees in 2022.

Interest in Pensions

In the NRI survey, women expressed interest in pensions and similar solutions to help better prepare them for retirement. About 3 in 4 women said they wish their 401(k) provided a "pension-like" income stream, while 9 in 10 said they would be at least somewhat likely to roll over their money into an in-plan protected retirement solution if it was offered to them. That’s notable as more employers are considering pensions due to a fragile retirement landscape and employees not being prepared for their post-work years.

“There’s this recognition that we need to change what we are doing,” Beth Ashmore, managing director for retirement at consulting firm WTW, told SHRM Online earlier this year. “We have a lot of employers that are saying, ‘Wait a minute; is this right? Because we have a retirement program, but we have a lot of employees not benefiting from it.’ ”

Women’s interest in pension-like retirement solutions “aligns with our research showing pension holders are more financially confident and less concerned about outliving their money than those without pensions,” said Marasco, noting that employers would be well-served to offer a guaranteed lifetime income investment solution through their qualified employer-sponsored plan.