May 2013

Women's Retirement Challenges

By Linda K. Stone

Linda K. Stone is an actuary and advocate for women’s retirement security. She is active in the SOA Committee on Post-Retirement Needs and Risks and previously was the East Region Retirement Business Leader for Towers Perrin.

The current state of retirement security in the United States is a national dilemma and it is worse for women than men. Women earn less than men, take more time out of the workforce for care giving of both children and parents, live longer and are more likely to live alone. As a result, they have lower employer-provided benefits when they do have access to a plan and they have a higher likelihood of outliving their resources.

WISER (Women’s Institute for a Secure Retirement) held their annual symposium, Overcoming Retirement Hurdles: The Financial Realities for Women, on December 6 & 7, 2012 in Washington, DC. WISER is a non-profit organization that works to help women, educators and policymakers understand the important issues surrounding women’s retirement income. The speakers represented financial services companies, think-tanks, government agencies, industry groups and Congress. They presented various perspectives and research on the current and future state of women’s long-term financial security as well as solutions to improve the situation.

The Government Accountability Office (GAO) presented highlights from their 2012 report, Retirement Security: Older Women at Risk, which showed that over the past decade, the median household incomes of women over age 65 were 25 percent lower than their male counterparts. The report also showed that poverty rates are higher for women and life changes like divorce and widowhood are more financially devastating to women than men. While over the past decade the percentage of women working for an employer who sponsored a retirement plan has increased relative to men, this result was achieved only because the percentage of men in employer sponsored plans has declined. The number of women who actually participated in a plan was less than men likely due to their lower earnings and /or working part-time. The GAO study includes detailed breakdowns of the composition of household income by sex and age as well as by race and ethnicity which may be of further interest.

Lincoln Financial Group (LFG) in their 2012 Participant Study found that women are more concerned and less optimistic than men about saving enough to retire on and maintaining their lifestyle in retirement. Their research showed that women’s decisions about how much to save and how to invest were most influenced by hope and fear while men were most influenced by hard facts and previous experience. Mass Mutual found that 54 percent of women liked learning about investments while 71 percent of men did. The research also showed that married women are much less likely than men to be the primary decision-makers of the household for saving and investment decisions.

Fidelity presented an assessment based on their data that showed that, currently, women’s 401(k) account balances are 74 percent of men’s balances. Women actually save at a higher percentage than men do—so the lower balance is due to lower earnings and years working less than full-time or not at all. The study found some areas in which female performed better than men, such as the fact that females invest more age-appropriately than men and that they “stay the course” in their investment selection. These investing behaviors result in getting the same investment returns as men over time with less risk.

So, what can be done to overcome these retirement hurdles for women? Putting aside the pay disparity issue, there are a limited number of specific levers to be pulled outside of changing individual behaviors. One reason for this is the erosion of employer sponsored defined benefit plans. The shift to a greater reliance on defined contribution plans has increased individual’s financial risk. Even worse, only 50 percent of the population has access to any employer sponsored plan which leaves the rest to their own resources.

Some potential levers were offered by Congressional staffers and government officials. They talked about potential legislative changes and policy options that could address some of these challenges. Ideas included broadening access to tax-efficient savings by payroll deductions to IRAs, increasing savings rates by plan changes and providing additional annuity options for lifetime income in both defined benefit and 401(k) plans to address longevity risk. Enhancing communication by adding account balance annuity equivalents to 401(k) statements was also discussed.

As these policy changes play out, there are steps that plan sponsors can take to help women have better outcomes. The LFG research found that only 27 percent of women were fully or somewhat engaged with their retirement plan where engagement was measured by indicators such as knowing how much money was in your plan or reading informational materials. LFG’s proposal to increase women’s engagement, motivation to save more and understand their retirement readiness situation better was to provide more opportunities for face-to-face meetings, either individually or in a group. Also, it is best to focus on personal outcomes and goals rather than details about the process. Fidelity found that women are more likely to take action such as increasing their savings rate after meetings or phone contact and they respond best to positive messages that inspire action versus doom and gloom scenarios. This information would be useful to share with plan sponsors as you work with them on their education and communication programs.

Social Security is a critical component of women’s retirement security due to their longer life expectancy and the inflation protection that it provides. Also, women rely on it more due to their lower retirement savings. The GAO study found that women overall are more dependent on Social Security than men and that widows rely on Social Security for 58 percent of their retirement income. Prudential presented strategies for claiming Social Security benefits that can benefit women in a number of situations. These strategies, despite being covered in the Wall Street Journal and as a subject of the SOA Managing Retirement Decisions Series, Deciding When To Claim Social Security, are not widely known. Married women and divorced women who are eligible for a spousal benefit can take best advantage of these strategies. Married couples can coordinate their claiming dates to insure that the potential widow’s benefit is as high as possible. There are also options that significantly maximize the present value of the lifetime benefits received. The study by Jim Mahaney on Prudential’s website, Innovative Strategies To Help Maximize Social Security Benefits, is must-reading for anyone who is close to Social Security eligibility and deciding when to claim their benefit.

The financial realities of retirement for women were clear at the close of the symposium as well as some ways forward to address those challenges that depend on changes in government policy, employer-sponsored plans and individual behavior.

Visit the WISER website,, for copies of the conference presentations and to learn more about these issues. As actuaries, we have valuable insights into these challenges and solutions. We can contribute to the broader dialogue that is happening around policy changes as well as inform and influence plan sponsors and individuals.

Linda Stone, FSA, EA, is an advocate for women’s retirement security. She can be reached at