'Perfect storm' affecting women's ability to save for retirement

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Women will retire with less money than their male counterparts because men tend to contribute higher percentages of their pay into an employer-sponsored retirement account, with the exception of women ages 50 to 64, according to a new ING Retirement Research Institute report titled “What about Women and Retirement?”

Over time, because women historically make less money than men, these percentage/contribution gaps can lead to significantly lower lifetime retirement savings for women, who will likely need more in savings to account for longer lifespans in retirement.

The report found that 73 percent of women currently contribute to an employer-sponsored retirement plan, compared to 77 percent of men, and fewer women (55 percent) than men (61 percent) report that they also are saving outside of an employer’s plan.

Delia deLisser, director of women’s marketing for ING U.S. Retirement, said that “when it comes to retirement savings, women have had the perfect storm. Women still have lower incomes than men do, about 80 cents per ever $1 men earn.”

She added that several studies have shown that this lower income over a lifetime equates to more than $400,000 less in retirement savings over time.

“Women take time from the workforce to care for children and other family members; they spend less years in the workforce than men do. That brings women’s Social Security benefits down, 26 percent less than men’s,” she said. Many women work part-time or don’t have access to an employer-sponsored retirement plan. All of these things make it harder for women to save enough for retirement.

According to the ING report, women of all ages have saved significantly less than men. Younger women have saved just two-thirds of men at the same age, and women ages 65-69 have saved just 78 percent of men the same age.

ING found that women face more barriers to saving for retirement, including insufficient income or a high level of debt. Women are more likely to report that they didn’t know what their retirement savings options were.

Divorced and widowed women are more likely to cite insufficient income or debt as their main barriers to saving for retirement. They also are less likely to report uncertainty about their retirement savings options.

Forty-two percent of women agree that they don’t know how to reach their retirement goals, compared to 31 percent of men. The report found that understanding how to reach retirement goals increases with age. While 45 percent of women under 50 don’t understand how to reach their goals, that drops to 36 percent of women between the ages of 50 and 64 and just 23 percent of working women ages 65 to 69.

Two-thirds of women, 64 percent, have never tried to calculate how much they need to reach their retirement goals and fully three-quarters do not have a formal financial plan in place.

ING also found that half of all women expect their employers to help them better understand their retirement goals and how to reach them, compared to just 44 percent of men.

This data is important for plan sponsors and advisors that work with women on retirement planning, deLisser said.

ING recommends that women set up and live by a monthly budget which includes contributions to a retirement account of some kind. It also states that women should contribute the maximum allowed in their employer-sponsored accounts and take advantage of catch-up contributions for those age 50 and over and any employer matches because they help build retirement savings without much effort on the part of the workers.

“Part of our reason for doing this study was to see what was happening with women, understand what they were doing relative to saving for retirement and find solutions for them to be better prepared,” deLisser said.

She added that she hopes the results of this study will help women realize that saving for retirement is important and that knowledge will help them to become better advocates for themselves in more actively saving for retirement.

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