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Addressing Women’s Retirement Challenges with Financial Wellness Programs

Sep 20, 2019

Key Takeaways

  • Women face different challenges that may have them outliving their retirement savings than men.
  • Workplace financial wellness programs can specifically address women’s financial challenges.
  • Customizing a benefits plan with features such as automatic enrollment can also help.

 

As a group, women are at greater risk than men of outliving their savings and not being able to maintain their standard of living in retirement. The causes are many, including lower lifetime earnings, lower Social Security benefits, and lower 401(k) balances. Other challenges include:

  • Longevity risk. Women tend to live longer than men—five years on average1 —which necessitates that they save more so they can generate retirement income for a longer period of time.
  • Inconsistent work histories. In the division of labor at home, women often assume more responsibility than men for housekeeping and caregiving. As a result, women tend to accrue fewer years of paid work and lower career earnings.2
  • Increased debt. Women today are carrying more debt in retirement, and at older ages, than they did in the past.3 If debt continues to grow with age, women will have to divert more of their retirement income to servicing it.
  • Singlehood in retirement. Women are more likely than men to be single in old age, and they need to plan for their retirement accordingly. In 2017, among Americans 65 and older, 70% of men were married compared to just 46% of women. Thirty-three percent of women 65 and older were widows.4
  • Higher healthcare costs. Medical costs generally increase with age. Because women tend to marry men who are older than them, and because they tend to live longer than men, women are at greater risk of depleting their retirement savings from paying for their spouse’s health and long-term care expenses.5

Employer-sponsored financial wellness programs can help women respond to these risks and challenges. Financial wellness programs are designed to help workers manage day-to-day finances, protect against key financial risks, and achieve important financial goals. They can be tailored to address the needs of specific employee segments, including female employees. Well-designed programs provide a combination of education, guidance, tools, products, and services, including:

  • Budgeting and debt management tools
  • Emergency savings accounts
  • Calculators for identifying adequate 401(k) contribution rates
  • Information on claiming Social Security benefits
  • Options to buy life insurance, which can help replace income in the event of a working spouse’s premature death, or provide money to a surviving spouse in retirement
  • Access to annuity products that can help provide guaranteed lifetime income

At the heart of any sound benefits program, of course, is a well-designed workplace retirement plan, such as a 401(k), that can help employees foster good savings behavior. Retirement plans can be particularly effective when they include features such as automatic enrollment (and re-enrollment) and automatic contribution escalation, which can automate prudent behaviors. Matching contributions from the employer can be helpful, too; they can help increase participation rates while bolstering employees’ retirement accounts. Access to a well-designed retirement savings account is becoming increasingly important as women face new and growing challenges to achieving a financially secure retirement.

 

Read More

To read more about women’s retirement challenges, read Planning for Retirement: Women in Two-Income Households at Highest Risk open in a new window.

  You may also be interested in other Financial Wellness opens in a new window, NRRI opens in a new window, or Women’s opens in a new window topics.

 

1U.S. Department of Health and Human Services, “Health, United States, 2017,” 2017.

2Society of Actuaries, “Women and Post-Retirement Risks”, 2018.

3Prudential, “Closing the Retirement Income Gender Gap: The Opportunity is Now”, 2017.

4Administration on Aging, U.S. Department of Health and Human Services, “2017 Profile of Older Americans”, p. 3, 2017.

5Society of Actuaries, “Women and Post-Retirement Risks”, 2018.

 

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