Women’s retirement prospects are improving, but not enough

Personal Finance

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When it comes to retirement, it’s no secret that women face an uphill battle financially.

And while women’s retirement readiness is improving, there’s room for much more, according to new research from the Aegon Center for Longevity and Retirement.

Women around the world share the same three career challenges: a gender pay gap, time away from their careers, often due to caregiving responsibilities, and a lack of compensation for those responsibilities.

Taken together, that leads to long-term financial inequality, and even poverty in retirement.

Now, Aegon has found that women’s retirement readiness has improved a bit in the past five years.

The Aegon Retirement Readiness Index uses a scale of 0 to 10, with a high score considered between 8 and 10.

In 2014, women had a retirement readiness score of 5.5, which increased to 5.8 in 2019.

While that’s an improvement, anything less than 6 is considered to be a low, said Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies, which collaborated with Aegon on the research.

In comparison, men fare better, with their retirement readiness score moving from 6 in 2014 to 6.2 in 2019.

“The progress on women’s retirement readiness is encouraging,” Collinson said. “However, we still have a lot more work to do for women to become truly retirement-ready.”

Women around the world face similar retirement dilemmas, according to Aegon’s research, which surveyed 16,000 workers and retirees in 15 countries.

Among the countries that ranked highest in 2019 were the U.S. and Turkey, as well as emerging markets India, Brazil and China.

Women were more likely to score below average in certain European countries – excluding the U.K. and Germany – as well as in Australia, Canada and Japan. (Australia was added to the survey in 2015, so there is no five-year comparison data for that country.)

One factor that can push certain countries higher in the rankings include having more robust benefits, which help boost women’s financial well-being, Collinson said. For example, some countries have stronger health-care systems, as in the case of the Netherlands and the U.K.

Of course, cultural norms also play a role. Gender roles — particularly when it comes to marriage, childbearing, caregiving and other family responsibilities — can limit women’s independence, and ultimately their ability to become financially secure.

The gender gap in labor force participation has only improved by 2% globally since 1990, the study noted.

Aegon’s research coincides with separate work from the Center for Retirement Research at Boston College, which found that 50-something women in the U.S. face specific financial vulnerabilities when preparing for retirement.

Married women run the risk of not having enough saved to provide for both members of the couple in retirement. That’s because often just one person has access to a workplace retirement savings plan and fails to save enough for two.

If you’re the one with the 401(k) plan, make sure you’re saving enough for your spouse, said Geoff Sanzenbacher, research fellow at the Center for Retirement Research. Or if your spouse has the retirement savings plan, remind them not to forget you.

“Very few couples do that,” Sanzenbacher said. “They almost always act like they’re just one person.”

Two-earner couples also tend to have a lower income-replacement rate through Social Security benefits based on their earnings records, the research found.

Meanwhile, single and divorced women have their own vulnerabilities, based on whether they have access to a workplace retirement savings plan, or if they had to recover financially from a breakup.

The key to shoring up retirement security is to make it easier for everyone to access retirement savings plans, according to Sanzenbacher. “We need to find a way to expand more retirement savings to more people,” he said.

What you can do now

Despite the challenges they face, women should not give up on pursuing financial security.

“Women need a vote of confidence,” Collinson said. “We can do this.”

The first step is to recognize the value of financial and retirement planning.

“Avoid becoming overwhelmed, because it can be counterproductive,” Collinson said.

Other important steps to take, according to Aegon’s report, include:

  • Start saving early and habitually. Admittedly, there are times in our lives when we can put away more money, and other times when it’s less. “Just the process of saving can make a big difference,” Collinson said.
  • Develop a written strategy. Create a plan that includes everything from goals you want to achieve to how you will reach those gaols. “It’s impossible to chart a course if you don’t have a destination in mind,” Collinson said.
  • Create a backup plan. Life will probably throw you some curve balls, so be ready to adjust your plans. That particularly goes if you plan to work longer and retire at an older age, Collinson said.
  • Maintain a healthy lifestyle. Your health is key to enjoying your time in retirement. And yet, not enough people are paying attention now to their diet, exercise and sleep. By focusing on those things now, you can keep health issues at bay later, Collinson said.
  • Embrace lifelong learning. Keeping your job skills up to date will help protect your income by keeping you employable. And it’s also important not to neglect your financial education, Collinson said, so you can make savvy decisions with your money.

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