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Female Retirement Funds Floundering: Women Not Saving as Much as Men

While the same percentage of men and women participate in company 401(k) plans, men saved an average of $100,000 compared with $59,300 for women.

September 27, 2013
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Related Topics: Retirement/Pensions, Benefits Design and Communication, Retirement Planning, The Latest, Benefits
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Women and retirement

Sam Pinney is not your average woman in today’s workforce when it comes to retirement savings. But it wasn’t until Pinney turned 39 that she took the time to get started.

“I never made a lot of money back” when she started working, “and I was in a bunch of different jobs that didn’t have retirement plans,” Pinney said. “So, I got a late start.”

About eight years ago, she landed a full-time job with Oracle Corp. in Redwood City, California. In her welcome packet, Pinney, who’s now 47, found the form and signed up for the company’s 401(k) plan. Each year, the associate director of brand marketing has maxed out on her contributions and now has a substantial $179,000 in savings — well over the $150,000 average Oracle account size, according to BrightScope Inc.

Pinney said she now feels good about what she has put together in a short amount of time.

“I never really thought about whether I’m going to retire when I want,” Pinney said. “It definitely worries me when I see those commercials with people talking numbers. But I don’t feel like I’m behind.”

Pinney, however, appears to be an anomaly. Most women are not saving like Pinney, according to a recent report from consulting firm Aon Hewitt. While women participate at the same rate as their male counterparts, they have half as much in their retirement accounts, save at a lower rate and often don’t pay back loans from their 401(k)s, the analysis showed.

“Women are just staying put and not escalating their contributions,” said Patti Balthazor Bjork, Aon Hewitt’s director of retirement research. “I don’t see [women] taking initiative in their plan. Men are simply more proactive.”

Aon Hewitt’s August report, “2013 Universe Benchmarks,” looked at 140 defined contribution plans with 3.5 million eligible employees and found that while about the same percentage of men and women participate in their company 401(k) plans, men have an average $100,000 in retirement savings compared with $59,300 for women. Men put in about 7.6 percent of pay while women are slightly less at 6.9 percent.

Because of the lower contribution, 31 percent of women aren’t able to take advantage of the free money, or the match companies give participants who reach a certain threshold.

“Leaving matching dollars on the table is like refusing a raise,” Bjork said.

Another issue is loans against their retirement savings. Aon Hewitt data show that women and men take out money at the same rate, but 71 percent of women with loans who leave their job don’t pay the money back compared with 64 percent of men.

“It’s a significant issue,” Bjork said. “If you leave the workforce and don’t pay the loan back, that money is never coming back into the system.”

While every worker has a unique set of circumstances, women often leave work to care for someone else, making saving for retirement difficult, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.

Transamerica’s latest research released in September shows that about a quarter of women say their greatest retirement fear is not having enough money to take care of their families. One in four women plan to or have already left work to take care of a family member. Plus, nearly a third of women say they expect to financially support family members — other than their spouse — in retirement.

Transamerica talked to about 3,600 full- and part-time workers for its study, nearly evenly split between men and women. About 45 percent of women and only 25 percent of men report working part-time, which can also lead to low or no access to a company retirement plan.

“As we make life decisions we need to be mindful that time in and out of the workforce leads to lower 401(k) savings,” Collinson said.

Women have less confidence in making investment decisions — another leading cause to lower account balances. Nearly 75 percent of women say they don’t know as much about retirement, and only half say they have some kind of retirement strategy. Many women — 59 percent — say they guessed when figuring out their savings plan.

“Unfortunately the statistics on women don’t change too much from year to year, so we have a long way to go,” Collinson said.

Bjork says education is a key in helping women understand how to avoid problems. Investing earlier, taking advantage of automatic features like annual increases in contributions, avoiding loans and using help tools like online advice, are all ways women can improve savings rates.

Collinson encouraged women to have conversations with friends and family as well as creating a retirement strategy.

“It’s important to have education tools, but never underestimate the power of the individual conversation,” Collinson said. “That is where human resources can play a large role.”

Patty Kujawa is a writer based in Milwaukee. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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