The Gender Gap

Women Playing Retirement Catch-Up

Can advisors improve their preparedness?

by Diane Garnick

Ms. Garnick is Managing Director and Chief Income Strategist at TIAA. Visit

If your clients had to retire today, would they have enough saved to carry them through a retirement that will likely last decades?

It’s no secret that many Americans are underprepared for retirement. TIAA’s 2016 Lifetime Income Survey found that fewer than half (46 percent) know how much they have saved in their retirement accounts. Even more surprising, 28 percent of respondents who are not retired admit they are not saving anything at all for their retirement.

Women face even more retirement challenges. The Gender Retirement Gap that women face occurs both during the savings years and continues throughout retirement. According to a recent report published by TIAA, in order for two recent college graduates to have the same amount of money saved for retirement, a man would need to save 10 percent of his salary while a woman would need to save 18 percent.

When it comes to retirement, there’s a clear and pronounced gender retirement gap.

A Breed That succeeds

There is a breed of women who succeed in spite of these obstacles. Proactive women. Thinking through retirement finances early and often provides proactive women with the insight they need to achieve success. Many of these successful women begin by addressing the barriers one at a time, implanting solutions as soon they are uncovered.

  • Women spend fewer years in the workforce – Over the course of their careers, women may take time off to have children then again to care for elderly parents. In fact, according to data from the Pew Research Center and the Social Security Administration, women can spend more than five years devoted to childcare and more than a year caring for parents. Compared to men, women spend six fewer years in the workforce. These career breaks can interrupt the cycle of saving, sometimes to a significant degree.
  • Women earn less than men – Retirement savings is frequently thought of as a percentage of pay, causing the gender pay gap to play a critical role in retirement savings. While the pay gap isn’t as stark as it used to be, it exists nonetheless. A “professional woman” earned 72 cents on the dollar relative to men in 2015. That meant a woman would earn an average of $996 per week compared to a man who earned $1,383. That difference adds up over time.
  • Women take on less investment risk – Women tend to be more risk averse and therefore adopt a different approach to investing. They trade and rebalance their portfolios less often, seek to protect the assets they do have and avoid risk in the hopes of generating higher returns. Outside of their primary retirement accounts, most women gravitate toward safer assets like cash or money market funds, whereas men choose stocks as riskier assets. This may ultimately result in women having smaller returns on their retirement savings.

Obstacles continue in retirement

Even if women successfully navigate these hurdles during their working years, they should prepare for additional obstacles that may surface in retirement. Women typically live longer lives than men.

Social Security data reveals that after a couple reaches the age of 65, two-thirds of women will outlive their husbands, potentially by decades. It’s essential they factor in longevity risk when planning for retirement and be prepared to inherit all household and healthcare expenses without having the financial support of a spouse.

This gives rise to another obstacle: Although many expect housing and healthcare costs to remain constant over time, these expenses actually begin to dominate retirement budgets as people age. According to the LIMRA Secure Retirement Institute’s 2015 Annual Fact Book, housing and healthcare costs make up 39.9 percent of the overall retirement budget for people age 55 to 64. But these expenses increase significantly in subsequent years: housing and healthcare comprise 44.5 percent of the retirement budget for people age 65 to 74 and 50.1 percent for those who are 75 and older.

Even if women successfully navigate these hurdles during their working years, they should prepare for additional obstacles that may surface in retirement... as they typically live longer lives than men

Women should think critically about how a chronic illness (or illnesses) may impact their finances over time and be sure to incorporate a healthcare inflation rate for healthcare expenses.

Access, tools and resources

To overcome the gender retirement gap, women need access to tools and resources that enable them to start planning early and develop concrete financial goals. For financial advisors and plan sponsors alike, this is a clear opportunity to get involved and engage with women to improve overall retirement readiness.

While each woman will have a different set of financial goals, there are a few steps that can help get women on the right track:

  • Set a higher contribution rate
    For plan sponsors, establishing a higher contribution rate would be particularly beneficial for women, especially considering they spend fewer years in the workforce compared to men. It may also serve as a helpful recruiting tool for employers and be a valued benefit for potential employees. Financial advisors should encourage their clients to evaluate their current contribution to their workplace retirement plans and develop a strategy for increasing it over time.
  • Increase targeted education
    Women face the Gender Retirement Gap, so plan sponsors and financial advisors should not adopt a one-size-fits-all approach. They should develop gender-specific education materials that help teach women about the retirement strategies that are available to them as well as the kind of investment options and solutions that may help them reach their financial goals.
  • QDIAs with higher levels of risk
    When evaluating investment options, plan sponsors should begin by analyzing the gender demographics of their employees. Firms with a high ratio of women may want to include qualified default investment alternative (QDIA) options that have marginally higher levels of risk. While higher risk in nature, advisors can demonstrate how large cap stocks, international stocks and real estate are assets that could offer a higher rate of return and ultimately, may help improve levels of lifetime income.
  • Prioritize guaranteed income
    Most people save for retirement to replace their paychecks in retirement. Guaranteed2 lifetime income options, such as annuities, enable people to achieve that goal. Since women live longer, and are likely to face higher expenses in retirement, lifetime income products can play a central role in helping ensure they do not outlive their assets.

Advisors can narrow the retirement gap

Luckily for advisors, women already sense that they may need more than the average retirement planning. According to TIAA’s 2016 Advice Matters Survey, 90 percent of respondents see the value in having a face-to-face meeting with a financial advisor. Among women, 73 percent say having advice tailored to their gender would be helpful.

While the retirement gender gap exists, financial advisors and plan sponsors have an opportunity to help narrow it. By implementing smart solutions, they can reinforce to women the importance of planning for retirement early in their careers, help them identify their financial goals and work with them to outline the steps they should take to achieve them.

That, paired with customized financial advice, can help position women to achieve financial success in their golden years and inspire confidence that the best is yet to come. ◊

1. Income Insights “Gender Retirement Gap”
2. Based upon the claims-paying ability of the issuing companies.