This post is from staff writer April Dykman.
There’s a lot of bad news during a recession: High levels of unemployment, foreclosures, and huge dents in the average Joe’s net worth.
But one good thing to come out of the financial crisis is that more people, women especially, are making an effort to better understand and contribute to retirement plans.
Participation increases in employer-sponsored plans
The Hartford Financial Services Group, an insurance and wealth management company, recently released new research findings which found that consumers have become more dedicated to understanding and saving within their employer-sponsored retirement plans. The study consisted of an online survey conducted by Zeldis Research and polled 1,000 people ranging from 18 to 65 years of age. Findings included the following:
- 43% of survey respondents indicated that they consider retirement savings more important today that they did before the financial crisis.
- 49% view it as just as important as they did before the crisis.
- 84% are participating in a 401k or other employer-sponsored retirement plan, up from 80% in 2009.
- 76% responded that they understood their retirement plans “completely” or “mostly,” up from 65% who were confident of their understanding last year.
Another key finding is that women are making noteworthy gains in participation rate and comprehension. Plan participation among women increased 9 points to 70% (men increased 5 points to 71%.). Also, of the women polled, 69% said they completely or mostly understood their retirement plan benefits, up from just 56% in 2009. (Men also saw a jump from 75% in 2009 to 83% in 2010.)
Struggling to save
Unfortunately, the study also found that 22% of those polled reduced contributions to their retirement, or stopped contributing altogether, due to economic conditions. This was the case for 22% of women, up from 11% last year, and 21% of men, up from 15% in 2009.
In addition, one in five surveyed indicated that their employer-match contributions had been lowered or eliminated.
Women and retirement obstacles
What struck me the most about the research report was the following statement by Sharon Ritchey, executive vice president and director of The Hartford’s Retirement Plans Group:
The greater rate of participation in retirement plans, especially on behalf of women, is a real encouraging sign. Compared to men, women have higher hurdles to reach a comfortable retirement. Women tend to earn less, be away from their jobs more often because of disabilities, pregnancies and family issues, and often invest less aggressively. On top of that, women tend to live longer than men and therefore need to rely on their retirement savings for more years.
When you put all of those factors together, it’s alarming that women still lag behind men in retirement planning, when clearly we need to be saving more. Ritchey points out that many women spend 20–40 years in retirement, and that sometimes sacrifices are necessary to save continuously throughout your working years, but it’s critical that we make those sacrifices. (If you’re a woman who is trying to figure out how to manage your retirement savings, check out these 8 questions from the US Department of Labor to help you get started.)
As a female I find this quite disconcerting. I’m not entirely sure how I’d describe my level of retirement comprehension, and I write about personal finance every day! For one thing, I haven’t made an effort to better understand my retirement options now that I’m self-employed, which is a mistake I need to rectify. Considering the statistics on women and retirement, it’s clearly time to stop procrastinating.
What do you think about the retirement hurdles women face? How do you feel about your level of understanding when it comes to your own retirement?
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There area always positives in what seems like a big bucket of negatives.
I think it’s great that women are taking a more serious look at their retirement. It’s very important, especially since many women outlive their husbands, that they know exactly how their future is outlined.
http://www.lifeandmyfinances.com
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I like the idea of defaulting into a plan rather than the default being not to be in the plan.
This past year I did spend about 2 days figuring out what I’d signed up for 4 years ago and made the switch from incredibly expensive Ing to less-expensive Fidelity. But the reason I went with Ing is because the guy stopped by my office. That might be worth 1% per year (or more) to people who are unsure about what to do.
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If your employer matches your contributions, you are getting a guaranteed 100% return on that money before it is ever even exposed to the markets. Everyone should take advantage of this if they are not doing so.
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I think “paralysis analysis” comes into play a lot with retirement decisions. In the context of personal finance, doing something is virtually always better than doing nothing. Not making a decision is a decision to remain vulnerable during your latter years.
All that being said, I think middle class households are saddled with so many fiscal responsibilities and confronted with so many new realities. For example, employers are trying to save money on healthcare, so employees have more and more responsibility – higher co-pays and prescription costs. If someone in the household is chronically ill, that’s a budget buster.
Also personal finance does not happen in a silo, gender socialization is a factor that’s unaccounted for in these studies, woman are socialized to be caregivers, nurturers, self-sacrificing for their families. That leaves us being behind the eight ball in the race to a secure and comfortable retirement.
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I’ve written about the hurdles women face in retirement too and while saving is definitely a necessary step, there are a lot of issues we should be addressing. For instance, why are we still earning less? Why isn’t there better support for caregivers from employers and the government such as a caregiving leave equivalent to maternity leave? (Caregivers save the healthcare system a lot of money each year, at least here in Canada).
Women are also harder hit financially after divorce, and we all know what divorce rates are looking like these days
I’m doing what I can to save for my future. I can only hope the government and employers will eventually catch up.
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Thanks for the warning April! Good stuff to think about.
I’m actually more interested in one of your last points – understanding retirement options as a self-employed person. Self-employed folks are definitely at a disadvantage when it comes to retirement (and after paying both parts of FICA, too) With no 401k, no employer match, no brokerage firm signed up to provide pre-screened funds from which to choose – and sometimes investment advice, (and certainly no old-fashioned pension), self-employed people seem to be stuck between a rock and a hard place. Can you guys tackle self-employment and retirement planning?
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I took the example of my stepmom and always vowed I would never end up like her. She has worked all her life and has never participated in the retirement plans offered at her jobs. Pretty soon she will retire with only social security and hopefully my father to help her. She always counted on us as being her monthly “interest payments”.By watching her I am coming into my own and making sure to do the opposite of everything she did. Every single one of my friends have a 401k or a pension that they actively pay attention to and allocate money to them. I hope this is a continuing trend for women in my generation.
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@ami #6 – my husband & I are going through the same thing, we have our own business and no outside employer.
We haven’t set anything up yet, but it seems many programs (401k, HRA/HSA) only require 2 employees, and the owner counts as an employee.
So if you have someone you can make an “employee” in addition to yourself, some of these tax-advantaged programs may be available to you.
It does seem to require some paperwork, filing, maintenance and lawyers and/or subscription(s) to legal forms service(s) for making sure all is done legally, and no-one will match your 401k, but for us so far it is definitely worth pursuing.
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huh… as a self-employed woman with a roth ira stuffed to the gills and performing marvelously, i don’t feel like i went across too many female-centric hurdles. quite the contrary, my sister took me aside to tell me the ins and outs of retirement planning and the stock market, mutual funds, long and short term gains, bless her heart.
the only thing i can think of is a book called “Smart Women Finish Rich” that was geared towards women- it’s an extremely helpful book- but i would have read it without it being titled towards the ladies.
i’m a little stung that this article is covering “women” as a unified group who all act the same. i know there are women-only issues, but i know a lot more about all this stuff then most of the guys i know. my sister could school any of them easily. couldn’t they have grouped people by age? class? something other than gender, always?
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@ami and @babysteps – The retirement benefits for self-employed people are often superior to traditional 401K/403B options, in my opinion, because they can have *much* (i.e., >3-fold) higher contribution limits. (I plan to be self-employed later specifically to take advantage of them.) Read up on Keogh plans and SEP IRAs. The “disadvantage” is that you don’t have someone picking plans for you, but I’ve always thought the Vanguard plan booklets were a waste of good trees.
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The problem with women is that we tend to put the needs of our kids before our own, This makes us retire, broke and unhappy. Even as adult children we still help them out.
You have to start acting just a little selfish and pay yourself a good 15-20% of your income!!
That’s what I did
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It would be interesting to know if jobs that have more female employees are less likely to offer retirement plans (such as very small businesses or non-profits). Are part-time workers generally eligible if something is offered?
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@Ami, in addition to reading up on SEP IRAs, you may also want to look into a solo 401(k) (aka “individual 401k”).
As a self-employed taxpayer, you’re likely eligible to contribute a ton to retirement accounts each year.
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I got divorced in my mid-thirties and that was my wake-up call to take care of my own retirement. I had some retirement funds from a job I held for six years. I kept that money in the account then did all that I could to add to it. I read Suze Orman (9 Steps to Financial Freedom). I realized that I had to take care of myself and that I couldn’t rely on someone else to do that for me.
I’ve since remarried and have kept up with adding to my retirement account and what I have actually exceeds what my husband has saved. (He invests in real estate). We have different investment styles and I tend to be more aggressive.
Bottom line is that you have to look out for yourself and don’t assume that someone will be there to take care of you.
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@L. Marie: on putting kids’ needs first – maybe it’s time to realize – by putting our own retirement needs first, we actually are prioritizing our kids’ needs. They won’t have to support us if we’ve provided for ourselves (unless they want to. My kids are my Plan B if the stock market completely tanks – in any case I wouldn’t mind living with them
)
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I started my blog to help bring my wife up to speed on our finance. She is my chief editor so she has to read everything I am posting. She knows how to save, but doesn’t completely understand the intricacy of various investment options like ROTH 401k, stock options, and others. The blog is forcing her to participate more on our total finance.
shameless plug – http://retireby40.org/
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Retirement seems to be the factor missing in all those “women opt out” articles that were so prevalent over the last couple years. When making the choice to have a family, you have to figure out how to care for the kids. Employers and states aren’t helping much if at all on this front. It’s largely still a woman’s problem. One thing missed is that social security is based on lifetime earnings so even if you end up having to rely in that safety net, you’re shorting yourself. You know, if it even exists when you get there.
I’m mid-30s and trying to get a handle on our retirement right now. It’s a vast field of information to wade through and people of both sexes have difficulty with it. Good to see that women are catching up to the men, though.
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Very few people truly understand all of the choices in their retirement plans. In the book “Nudge” the authors, who have PhDs in Economics (or some related field) admit that they find retirement plans daunting. That’s why they argue for the default choices provided in plans be thoughtfully chosen by the firms administering the plans to make the most sense for the employee. Of course, information is still distributed and the employee can make other choices. But some huge % just stick with the default, even if its not to put anything away. It seems that more employers are taking this approach, including mine.
As for the complexities of women’s retirement, they are difficult to overcome. I think that for women of my generation (X) and younger we have seen our mothers/aunts/grandmothers struggle and are learning to rely on ourselves far more than previous generations did.
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There is a great book called Secrets of Six Figure Women that is worth a read. It runs through women from all walks of life and how they ended up making at least $100,000 a year. The interesting part, I think, is not so much the nuts and bolts of it all, but the bizarre psychological hurdles some women (myself included) have placed in their own paths. It’s an enlightening, quick read.
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This is great that women are taking more initiative in making plans down the line for retirement. Most women out live their spouses and with a good nest egg or retirement plan, they won’t have to resort to struggling. It’s great to hear stuff like this.
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It’s surprising how many young women there are who opt out of retirement because it seems so far in the future. I’m 52 now, and I wish some wise person had sat me down when I was in my 20s or 30s to explained how very important it is to save for retireemnt. Now that I’m older and wiser, I’m doing my best to make up for my lack of forethought and to pass this wisdom on to my daughter and other younger women in my life.
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My boyfriend’s sister just had a third child and decided to quit her job as a teacher to take care of the kids full-time. I told him that she should take into consideration the lost time in retirement accummulation even if all her income went straight to day care. Being a stay-at-home mom is a very noble choice, but could financially devastate women if they are not simultaneously investing in a career.
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There’s not that much real data presented in this article:
participation among women increased 9 points to 70%
men increased 5 points to 71%
That means that the previous rates for men and women were 66% and 61%, respectively. Now it’s 71% and 70%. It also shows reduced contributions that are pretty close (21 vs 22%) between men and women.
The title for this article could be:
“Fairly narrow gender gap in retirement plan participation effectively disappears”
I don’t understand how that’s disconcerting.
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One of the biggest barriers to a secure retirement for women is the decision to stay home for a period of time to take care of young children. If they were lucky enough to even have a job that provided retirement benefits, the lapse in employment while raising children will leave them will less benefits than their husband. If he leaves (as mine did), she may not have enough saved to see her through retirement. If it wasn’t for my second husband, I’d probably never be able to retire. My mom was divorced and she was finally “forced” to retire in her early 70′s. After that all she had was her social security of $1,200/month.
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To KarenJ and AC- I agree that women who completely step out of the workforce can be at somewhat of a disadvantage in saving for retirement. However, if I am correct, if their husbands are employed they can usually set up a spousal IRA (so, in addition to contributing to the husband’s IRA with his income, he can contribute to one in his wife’s name). I’d recommend any woman planning to step out of the workforce to strongly consider that option.
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I work with a woman in her early 70′s who will work until she drops. A bad marriage, and the lingering financial fallout have left her with no choice. She is luckily fairly healthy, and lives in government subsidised housing. When she is no longer able to work, she will move to senior housing or a nursing home, she will have no other choice. She is a smart woman, and fully aware of investing and retirement options, and hasn’t got a dime to do anything about them. I think she is rather typical of the lower middle class. Not unintelligent, just underfunded.
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@ Tyler,
Sierra doesn’t find the 70% vs. 71% disconcerting, but the fact that “Women tend to earn less, be away from their jobs more often because of disabilities, pregnancies and family issues, and often invest less aggressively. On top of that, women tend to live longer than men and therefore need to rely on their retirement savings for more years.”
She doesn’t actually offer any statitics to support this statement which, in my opinion, is the most important part of the article.
I’d like to see the data on how women fare vs. men in retirement. How much has a typical 50, 60, 65 year old woman saved, vs. a man her age? At what age will a woman statistically run out of her nest egg? How many more women count only on Social Security?
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I think the commenter who brought up that women are socialized to be nurturers and caregivers is quite accurate. And I’m not sure why, but it really bugs me to see all these comments from men pointing to how husbands play such a key role in women’s retirement. I know it’s a fact, but it bugs me that so many women are counting on husbands to fill in the gaps created for the wive’s personal financial well being when children are brought into a marriage.
Even though I don’t have children and have no plans to ever do so, I still shorted myself on retirement savings until after I got married at 30. It just seemed there were all sorts of reasons not to worry about retirement until I became a “real grown up” when I got married.
I’ve been contributing to my (employer matched) 401(k) for 12 years now and am always happy to get the quarterly statement and be reminded of how I’m taking care of my own retirement. I’m also grateful that when we divorced, my ex-husband and I decided to leave each other’s retirement funds alone. It would have been a wash either way, but the psychological effect of having to cut up that account would have been so much worse than any of the other accounts we had to divvy up.
I guess this article points to yet another way that having a uterus is a drawback in this culture.
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@ Kandace, we have been living parallel lives!
When I was financially leveled during a divorce in my mid 30s, 9 Steps to Financial Freedom was the first book I read. From then on, I was consumed with hunger for financial education and kept on reading. I also took a few classes in personal finance. At the last class, when I realized I was no longer hearing anything new, I was able to let go of my anxiety about retirement planning. I had but one thing left to do. SAVE!
I’m 48 now. According to all calculators I’ve run – if I keep going as I am now, and figuring in SS at just 70% of today’s estimate, I will have well over $1 million at retirement.
Incidentally, I’ve never been a high earner. Average or slightly above. But I also never had the burden (and joy) of kids, and I think that makes a huge difference.
There is still inequality in pay among the genders. It may be shrinking, but altogether too slow. The recession has hurt gains as well. But I now know more women who in charge of their finances and retirement savings, and are far more savvy than I am. I remain optimistic that women will become more empowered.
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I’m a single female in a serious relationship. My question for all you women who have been socked in divorces – and for anyone who has been or is married is:
Should prenuptial agreements be the norm rather than the exception?
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As a single mother I definitely know how important it is to set up a retirement plan early. It scary to see what is happening with SS and I have little faith in the system so I feel its up to me to plan and prepare. Even just $100 bucks a month saved will and is adding up for my future so I won’t become a burden to anyone- still its a big mountain to climb!
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I’m a 20 year old woman and I haven’t started saving for retirement yet but plan to in the near future. With that being said, how do I encourage my boyfriend to feel the same about actively saving for retirement? I’m not going to be relying on social security, since it probably won’t exist when we get old. There’s not the same fire under his butt as there is mine when it comes to living off the law of the land. Any tips/advice? Topics of conversation to make him see the light?
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To be honest, I don’t fully understand my employer’s pension formula, but I figure since I throw 40% of my gross income into various retirement accounts, I’ll be okay.
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My wife was way ahead of everyone when we met so long ago. She had major investments managed carefully. I’m sure investing was new to some years ago but today its in the public eye everyday. Women are way ahead of us men in this department. Women make money and know how to stretch a dollar to the breaking point. I have a great women in my life who knows how to do it right.
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It is insanity to not participate – especially if there is an employer match. Would you willing give back part of your salary? That is what you do if you leave the match on the table.
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@ #30 (Learning): I guess I’d say marriage is just as risky as investing in the stock market directly. I wouldn’t suggest that you must get a prenup; your decision to do so depends on how many assets you may have and your tolerance for risk.
Both my ex-husband and I are better off financially, despite the divorce. We supported each other through a period of great professional growth, and by pooling our resources we were able to purchase a house well before the market was at its peak. Yes, we had to “split the pot” during the divorce, but we each got some valuable assets.
Financially we were very good together. We just weren’t very good together in other ways.
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Very encouraging signs. Women really have to focus on retirement savings as they have a much greater possibility of being retired for a longer time than they were actually in the work force.
Agree with Bill (#35 above) – crazy to leave behind a proportion of your salary if there is a match (not to mention the 100% Return of Investment)….
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The biggest financial issues in my life as a woman (I’m 50), have been because of marriage and divorce.
I think our culture encourages women to ignore the financial aspects of these life changing events. That needs to change.
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@#30 (Learning) – my feeling is that anyone who marries for the first time under the age of 30, or with any significant assets, needs a prenup. I know, that covers a lot of people.
Reason why: many, if not most, people getting married simply do not have the in-depth conversations and understandings about finance and its role in a marriage that drawing up a prenup should precipitate.
That being said, it would help if the prenup could be re-characterized as a mutual financial disclosure and life goals document, because the common perception of a prenup is that it is merely a treaty establishing who gets what in case of war.
DH and I married at 41 and 35, respectively, and did not do a prenup – because we had no assets, but also because during the two years leading up to marriage we had some very intensive discussions of our financial status and goals.
One other thing that more people, but perhaps especially women, need to do is understand what their bare minimum acceptable quality of life is, how much it costs, and how much they as individuals are realistically able to contribute to that. Someone with a minimalist approach to life is not going to have the high income requirements of someone who feels she truly needs a 5-bedroom house.
And a final thing that women in the U.S. really need to do is get over the idea that the only “normal” living situations are 1) alone or 2) with a man (married or not) or 3) with parents. I think we’re going to see a lot more adult women living with other women as roommates in the next decade.
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Stories of seniors motivate me to save, they really do, especially female seniors. I don’t want to be old and broke, its one thing to be broke in your twenties but quite another to be broke in your golden years.
The thing is that a lot of women major in pointless majors and I hate to say that way but too many women go into teaching, we need to major more in business, science, math, etc.
Things that pay more, many women choose majors like sociology and no wonder they never get anywhere. I know it sounds bad but women still choose majors that aren’t very practical, yes guys do it too, but women more so. Even though we live in very modern times many women are still traditional and expect their husband will provide for their future.
They don’t like to think of divorce or having a separate savings account because they think its going to jinx their marriage, no its never fun to think about such things, but its better to be safe than sorry. It seems many women even in the present day still don’t earn until its too late.
That’s why I’m reading about retirement as much as possible, I don’t want to be like that, I want to have enough savings. I’m 27, I’m not counting SS to be there for me. Young people and young women have to be their own backup plans we really do.
In some countries the government forces you to save, I wonder if we should start doing that, I take more of a libertarian approach when it comes to politics so I really don’t like the idea of forcing people to do anything but at the same time maybe we should?!
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