Five of six women are not saving enough for retirement, according to the latest research from Aon Hewitt, a benefits consultant firm.
But employers can and should take steps to help women close the gap, according to Aon Hewitt.
Although women and men are participating in employer-sponsored 401(k) plans at the same rate, women are saving less. Eighty-three percent of U.S. women are not saving enough to meet their needs in retirement, versus 74 percent of men.
“Women in some cases are hit repeatedly throughout their career or dinged throughout their career in saving for retirement,” said Virginia Maguire, director of retirement products and solutions at Aon Hewitt. “They start at a lower salary scale. To save the same percentage (as men) would be a smaller dollar amount a month. Often women take a break in service, so they have a smaller (retirement) balance.”
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Adding to the problem, Maguire said, women take more emergency withdrawals and loans from their 401(k) savings than men, don’t save as high a percentage of their salaries and generally don’t use the 401(k) catch-up provisions. The catch-up allows employees over the age of 50 to save an additional $6,000 a year in their 401(k) plans, in addition to the annual $18,000 limit.
“When we look at withdrawal and loan data, it is incredibly telling,” she said. “Often loans and withdrawals do not have anything to do with their retirement plan. It’s because they don’t have emergency savings, or they have health issues.”
The company says employers can help women close the retirement savings gap by:
▪ Offering tools such as health care and financial market education, budgeting and debt management to help women better manage day-to-day and long-term financial plans
▪ Providing professional help with investments.
▪ Adding features to their plans to help increase savings rate, such as automatic contribution escalation features.