Women still lag men in retirement saving. Why?

-- | 26/09/2019

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Christine Benz: Hi, I'm Christine Benz from Morningstar.com. How far behind are women relative to men, when it comes to retirement savings? Joining me to share some research on that topic is Judith Ward. She is a senior financial planner for T. Rowe Price.

Judy, thank you so much for being here.

Judith Ward: Thanks.

Benz: Judy, you did a survey of people, women, at various life stages attempting to get your arms around how they approach retirement savings, how they're doing toward retirement preparedness. I think the general takeaway is that women are lagging their male counterparts, but you did examine it by generation. Let's start with the baby boomers, because these are people who are entering retirement, in retirement. How are they doing in terms of retirement preparedness?

Ward: So, at T. Rowe Price, we have a retirement saving and spending survey that we do on an annual basis. And we cut that by gender, and also, somewhat by generations. And yeah, it validates a lot of the research that we've seen out there that women are lagging in terms of income, and they're lagging in terms of retirement savings.

Benz: So, the income differential largely explains the savings shortfall.

Ward: Yes, absolutely. The baby boomer women were the worst off. And honestly, that wasn't unexpected, because when you think about - I'm a baby boomer - so, when you think about along our careers, most of us have maybe taken time out of the workforce. I know a lot of my friends who are stay-at-home mums. Maybe we've altered our careers for caregiving, or when we've had children. So, we just didn't concentrate as much on the career. So, that's really not unexpected.

But what I would say is moving into retirement, what women need to be cautious of is the idea of how the household is going to hold up while they're in retirement. Another thing we found in this research was that if the retirees who had been retired for 11 or more years, 45% of the women were divorced or widowed, versus just 17% of men. So, that means at some point, because statistically women outlive men, that they might be going solo. And so, it's really important to be engaged with the finances and understand what's going to happen when one of us is a surviving spouse, and am I going to be OK?

Benz: And I've always heard that the single retired women, that's one of the most at-risk cohorts, right?

Ward: Right. Yes. Yeah, and there's some things that you can do. Of course, you can understand "What is going to happen with our assets?" if you haven't been involved in that aspect. Get involved. Again, you don't have to be an investment guru, but you have to understand what's going to happen. Another thing prior to retirement is the Social Security decisions. Those are really important, especially if you want to maximize the benefit for a surviving spouse. So, those are some pretty heavy areas that can really make a difference for women in retirement.

Benz: And, I guess, "get help" would be another piece of advice.

Ward: Yes. Absolutely.

Benz: OK. So, you say when you look at these surveys, the boomer data discouraging, but not surprising. One thing that jumped out at you that you thought was a little more surprising was what's going on with millennial women. So, let's talk about that, that here again you see some of the same patterns, lower incomes relative to men, as well as lower retirement savings.

Ward: Right. And that was a bit concerning, because I spend a lot of time trying to educate people about retirement savings and financial wellness. And so, it was really discouraging to see that millennial women were lagging in terms of their income and retirement savings compared to their male counterparts, consider they are the largest generation in the workforce now. And some of it has to do, I think, with their job choice. They may be going into jobs that do pay a decent wage but might have limited upside potential.

Benz: What would be an example?

Ward: Well, so an example - we saw the social services industry as - I think the women were in that industry 3 to 1 compared to men. The information technology industry, for example, the men were like 2 or 3 to 1, to women. And so, some of those industries, they have a pretty good starting salary, but they also have a lot of upside potential. So, that…

Benz: In the IT space.

Ward: Yeah, in the IT space, or some of these other industries. And I'm not going to pass judgment on why people choose the career that they want. But I think it just means that women need to be intentional about their saving and their spending, and to make sure that they get on a good track to manage the financial aspects.

One interesting thing we found was that their levels of debt were about the same. I mean, there wasn't - like their student loan debt didn't jump out as being different than their male counterparts. But when they have a lower income, that debt-to-income ratio is higher. So, try to manage debt. We talk about budgeting. That's a framework to help you understand where you're spending your money and incorporating savings goals. The money on the side - I think it's important for women to have some flexibility, so they maybe could change careers if they choose to. So, I think there are some very tactical things that not just women, but anyone really saving for retirement. But you have to be mindful and intentional to put those things into action in order to just set yourself up for a good retirement and a good financial independence really.

Benz: Did you aim to get your arms around how confident or comfortable women are relative to men when it comes to financial decision-making?

Ward: We didn't ask that specifically. But I do recall a question we asked about: "Do you know how much you should be saving for retirement?" More women than men said they do not know. Or they answered, you know, very low amount.

Benz: I saw that on the survey, like, 3%, 4% in some cases.

Ward: Right. And so, that tells us there's an opportunity to really reach out to women and make sure they understand what are some good rules of thumb. It's an educational opportunity. And that they are they're willing, they want advice, they want people to help them. But they need advice that fits into their busy lives and is available when they need it. But they're willing. So, I think just the fact that they're saying, "I don't know," they're telling us that they want the education and they're asking for it.

Benz: Really interesting research, Judy. Thank you so much for being here.

Ward: Thank you.

Benz: Thanks for watching. I'm Christine Benz from Morningstar.com.

This report appeared on www.morningstar.com.au 2022 Morningstar Australasia Pty Limited

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