Add women’s retirement security to the long list of financial hits resulting from the COVID-19 pandemic.
A staggering half of working women (51%) say their financial situation has declined due to the impacts of the last 18 months, which exacerbates a long-running trend that legislators have sought to address. The latest outlook comes from a targeted look at how women are faring financially during the pandemic–and what can be done about it.
The data for Life in the COVID-19 Pandemic: Women’s Health, Finances, and Retirement Outlook, was carved out from the results of Transamerica Center for Retirement Studies‘ long-running Annual Retirement Survey of Workers, in collaboration with Transamerica Institute. And though it found that two-thirds of women are saving for retirement through 401k or similar plans, there are also some sobering points emerging.
Notably, more than a quarter (27%) of women took a loan, early withdrawal or a hardship withdrawal from their retirement plan, likely spurred by the loosening of penalties brought on by various legislative actions (SECURE Act, CARES Act, etc.). History is showing that these withdrawals weren’t always well thought out for many.
Retirement confidence, savings, hit low points
Women’s retirement outlook showed cracks as only one in five are “very” confident that they will be able to fully retire with a comfortable lifestyle. And, unsurprisingly, a similar amount say this confidence declined during the pandemic.
The study also reported that household retirement savings are “alarmingly low” with women having saved only $57,000 (estimated median) in all household retirement accounts. Retirement savings did increase with age in leaps and bounds: Generation Z women have saved $5,000, Millennials have saved $42,000, Generation X has saved $66,000, and Baby Boomers with the highest at $134,000 (estimated medians).
These expectations and actions translate into more than half of working women expecting to work past age 65 or even more concerning, they don’t plan to retire at all. At least 53% plan to continue working at least part-time in retirement. The causes are clear with the majority (83%) citing financial reasons for planning to do so, and 77% saying it will be due to healthy aging-related reasons.
Unfortunately, it’s a trend that had been improving, but now has decisively been pummeled by the pandemic.
“Despite progress made in recent decades, women continue to be at greater risk of not achieving a financially secure retirement than men, in large part due to the gender pay gap and time out of the workforce for parenting and caregiving,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
She adds that as a result of the pandemic, “many women have been stretched beyond their limits, balancing work and family.”
Overall financial wellbeing at the receiving end of pandemic
Financial wellness, and its related stress on women workers, hasn’t done much better according to the study. The impact was felt across a number of areas that working women faced, which caused many of them (nearly 40%) to say that they were having trouble making ends meet and often feeling anxious and depressed. The reasons behind this stress is clear:
- 60% had to make adjustments due to pandemic-related financial strain, such as reducing day-to-day expenses (35%), dipping into savings accounts (25%), and/or accumulating new credit card debt (17%).
- Women cited skipping health care (13%) or borrowing money from others (both at 13%), and reducing/stopping contributing to retirement accounts (12%) as steps they felt compelled to take to make ends meet.
- Many (42%) also experienced one or more impacts to their employment as a result of the pandemic, including reduced work hours, reduced salaries, furloughs, layoffs, and/or early retirement.
Transamerica’s Collinson says despite the challenges working women have faced, they still have “big dreams” and are focused on their future retirement. But they can’t do it alone.
“While women are doing their part by saving and investing for retirement, concerted actions are also needed from policymakers and employers to address structural issues, bridge inequalities, ensure equal pay and benefits, and ultimately promote their retirement security,” she states.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.