Unsurprising, but still upsetting.
While women and men are participating in 401(k) plans at the same rate (79 percent), a report from Aon Hewitt revealed women are nonetheless saving less.
Despite longer life spans and therefore a need for greater retirement income, women are contributing 7.5 percent of salary to their 401(k), more than a full percentage point behind their male counterparts (8.7 percent), further creating a gap in savings.
This lower savings rate, combined with disparities in salaries, are contributing to low 401(k) plan balances for women. In 2015, women had an average plan balance of $71,060 compared to $119,150 for men.
While not earthshattering, Aon Hewitt suggested 401(k) plan sponsors take the following steps to help women close the retirement savings gap:
- Offer tools to improve overall financial wellbeing. According to Aon Hewitt’s 2015 Financial Mindset Study, more than four out of 10 women cite affordability as the biggest barrier to saving for retirement. Employers can offer tools and resources 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.
- Provide professional investment help. Workers who use professional investment help in the form of managed accounts, target-date funds and professional advice fair better than those who invest on their own. Offering access to these investment options as well as online or in-person advice can help workers benefit from the expertise of professionals and potentially improve their long-term financial outlook.
- Add plan features to increase savings rates. Helping workers save more should happen from the moment they join their employer’s 401(k) plan. Defaulting workers into the plan at a higher savings rate, such as 6 percent or higher, can make a significant impact on long-term savings. Employers can also add automatic contribution escalation features that will slowly increase workers’ savings rate over time.
“When employers take an active role in helping all workers improve their financial wellbeing and save more for retirement, women will benefit,” according to the company. “Small changes to plan design and an improved focus on day-to-day finances can go a long way to closing the savings gap.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.