Financial Well-being for Women: Empowering Employees by Helping Them Prepare for Retirement

May 2018

The growth of women’s influence in U.S. workplaces has been remarkable over the last several decades. Female labor force participation rates have increased from 43% in 1970 to 57% in 2018, according to the Federal Reserve Bank of St. Louis. As of 2016, women held 52% of all management, professional and related positions, according to the Bureau of Labor Statistics. But there are still many areas where a significant gap remains between men and women employees, including when it comes to preparing for retirement.
According to a recent Merrill Lynch study, Women and Financial Wellness: Beyond the Bottom Line, women may make $1 million less than men by the time they reach retirement. This disparity has many causes. Women are much more likely than men to experience multiple work interruptions to take care of children, parents and spouses. Combining this with lower pay, part-time or freelance jobs with little to no access to retirement savings plans, longer lifespans, and health care needs, a bleak financial retirement picture for women emerges.
Furthermore, women’s attitudes and priorities may add additional obstacles to financial well-being. The 18th Annual Transamerica Retirement Survey of American Workers showed that only 12 percent of women are very confident they will retire comfortably, compared to 24 percent of men. Only 51 percent of women say that saving for is a priority, compared to 62 percent of men, according to the survey.
The good news is that women and men want help from their employers to improve their financial well-being. Mercer’s Healthy, Wealthy and Work-Wise study showed that 79 percent of Americans trust their employer to give sound financial retirement assistance. In addition, 85 percent say they are interested in using online financial tools. This high level of trust, along with the increased comfort level to get online support, puts employers in a unique position to help women break many of the barriers that prevent them from having a successful financial well-being plan.
Where to Start?
That is a question many women ask when it comes to finances. While women are at ease talking about parenting, health and work issues, financial topics like budgeting, investing and savings are taboo. In fact, the Merrill Lynch study found that 61 percent of women would rather talk about the details of their own death than money issues.
1. Acknowledge the issue and talk about it
Given the unique issues facing women about retirement, it’s time to give it higher priority by initiating the conversation. Raising women’s comfort levels in talking about financial issues can be a great first step for employers. Lunch-and-learn sessions or small-group gatherings can be useful opportunities to start a financial conversation. If the live gatherings are inconvenient, offering online webinars can be just as effective.
Initiating a conversation about finances can often lead to creating a plan. In many cases, women know how much they can spend on groceries each week, but they haven’t calculated how much money they will need for retirement, emergency savings or other financial essentials. Helping women recognize the need to answer these questions can help lower stress levels, which will allow them to become more productive at work.
2. Build on strengths
There are a lot of things women already do well, so use those natural strengths to spring into other financial areas. Often women are in charge of balancing the family checkbook, managing budgets and initiating other planning strategies. Recognizing these strengths can be a way to boost a woman’s confidence in managing other financial issues.
Meanwhile, when it comes to investing, women are more conservative than men. While being overly aggressive is certainly problematic, being too conservative carries dangers of its own—especially considering that women should be investing for a longer time horizon than men. Women who reach age 65 are expected to live an additional 20 years on average. Women, by and large, also could benefit from being more aggressive when it comes to the amount that they put away for retirement. The Transamerica survey showed that while 73 percent of women are saving for retirement at work, they are only contributing about 7 percent of pay. Most experts recommend participants save 15 percent of pay each year to reach a healthy retirement savings amount. In addition, Transamerica data showed women’s median account balance at $42,000.
3. Encourage good savings behavior through plan design
Employers can play an important role in improving savings rates of all workers by using automatic features like auto enrollment and escalation. These combined strategies can help eliminate the conservative thinking and guesswork. In general, participants are automatically enrolled into a qualified default investment account, like a target-date fund. Target-date funds are diversified investment accounts that are often tailored to a participant’s retirement age, and not to what a participant might guess would be appropriate for their time horizon.
4. Technology is key
Technology can also play an important role in helping employees become more comfortable and confident when it comes to investing and long-term planning. Today, many providers are offering more than just calculators that factor interest and contribution rates to help figure out finances. Women can gain financial confidence by exploring tools that let them see how changes to their spending, savings and investing behavior—such as increasing Health Savings Account contributions, accelerating debt repayments or taking on more risk in their investment portfolio—are projected to play out of multiple decades.
BDO Insight: Reduce Employees’ Financial Stress by Increasing Retirement Preparedness
Women’s lack of retirement preparedness is a major problem for society, especially as millions of baby boomers near retirement age. It also presents a powerful opportunity for employers to engage with this segment of their workforce in a productive and empowering way.
While the need to address retirement planning may seem to be most urgent for older employees who are nearing retirement, the topic is relevant for employees of all ages. In fact, given the power of compounding, the benefits of establishing a retirement savings strategy could be greatest for millennials and other younger workers. Plan sponsors should account for generational differences in attitudes and expectations about retirement when developing a plan for engaging with their employees on this important topic.
In addition to helping women have long-lasting, healthy retirements, raising financial well-being among female workers can have significant benefits for employers as well. The Mercer study showed that 67 percent of women are feeling financial pressures compared to 60 percent of men. Not saving enough for retirement is stressing out 44 percent of women and 36 percent of men. By helping women feel more confident about their long-term financial futures, companies can help their workforces be happier and more productive in the near term.
Offering unique ways for women to talk about their financial issues, giving them tools to quantify and explore different long-term scenarios and increasing participation by using automatic enrollment and escalation features are ways employers can positively impact women’s financial well-being and preparedness for retirement. To discuss ways you can help address this within your own workforce, contact a member of BDO’s ERISA practice. 

Beth Garner
Assurance Partner
National Practice Leader, Employee Benefit Plan Audits
   Jam Yap
Assurance Director
Southeast Region Practice Leader