A new report from Goldman Sachs investigates the unique challenges women face in saving for retirement, from gender gap differences and caregiving responsibilities to longer life expectancies.
The report, Challenges Women Face Saving for Retirement, from the annual Retirement Survey & Insights Report by Goldman Sachs Asset Management, offers solutions that could improve retirement security among women. The firm points to a “financial vortex” of personal and economic matters that could upend investors’ finances and strain their ability to save for retirement.
The challenges that come with a “financial vortex” especially impact women saving for the short-term, emergencies, and for retirement, adds Goldman Sachs in its new report. The findings show that income disparities could potentially lead to a 24% loss in retirement savings for women.
According to the survey, 61% of families in the U.S. have their caregiving managed by a woman, and 40% of women leave their jobs for caregiving responsibilities, whether for childcare or eldercare. Furthermore, 21% have left a full-time job for part time work to fulfill their caregiving roles, and women are twice as likely as men to leave the workforce for over a year.
When asked about the causes that impact their ability to save for retirement, caregiving and financially supporting family members was one of the top reasons among caregivers (78%), after monthly expenses (80%) and financial hardships (79%).
Others even report retiring earlier than planned because of caregiving priorities.
Goldman Sachs illustrates the potential scope of this problem, noting that in its report, 28% of retired women said they have less than $50,000 in their retirement savings, with 44% having more than $200,000. In comparison, 24% of retired men report less than $50,000, and 54% report more than $200,000.
According to Goldman Sachs, assuming a 4% withdrawal rate, $50,000 in retirement savings provides $2,000 of income per year. While Social Security benefits are an essential part of retirement income strategy, according to the U.S. Social Security Administration (SSA), women on average receive 22% less in Social Security benefits due to career pay gaps and part-time work.
While many financial advisors suggest saving enough to provide 70% of working income in retirement, Goldman Sachs’ study shows that few do: 74% of women, compared to 65% of men, live on less than 70% of their working income. Yet only 31% of women and 18% of men report being dissatisfied with their income level.
Offering comprehensive solutions
Goldman Sachs notes how much of the industry commonly advises women to save more and invest early, yet the task isn’t so simple. “In retirement savings, the solutions often seem obvious: save more, save early, and invest consistently,” said Marci Green, managing director and head of Retirement Intermediary Distribution at Goldman Sachs Asset Management. “But this is an ‘easy to say, hard to do’ problem for many, especially women.”
In fact, most of the solution lies in enhancing and expanding advice, adds Goldman Sachs. This includes improving financial education, expanding access to professional advice, and “providing broader customized retirement solutions and guaranteed income options,” Green comments. All these steps help women build more confidence in their financial savings journey, she says.
Some women also report a preference for income guarantees rather than solutions that help manage income, Goldman Sachs found. In the survey, 57% of women said they want income that is consistent and stable and 53% want income that is guaranteed for life, compared to 45% and 44% of men, respectively.
“Retirement savings disparities are being broadly felt across the US population, and they are growing,” said Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management.
“Over the last 30-plus years, the top 20% of retirement savers have done well. Meanwhile the bottom 80% have seen limited retirement savings progress. That 80% encompasses many demographics, all with unique challenges. We as retirement professionals must do more to help women and men maximize their working earnings, save enough, and invest well as they seek to provide for themselves and their families.”
SEE ALSO:
- Women Feeling Derailed With Retirement Savings
- Financial Vortex May Threaten U.S. Retirement Savings
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
