Women Are Falling Behind On Retirement Savings – Here’s Why.

Planning for retirement is essential no matter your gender, race or background, so why are some many women falling behind in this key area of financial planning?

Data from San Francisco-based Personal Capital points to a wide gap between men and women when it comes to retirement planning. Long term, compounding interest could make this gap even wider.

According to a study by Student Loan Hero, men have an average of $90,189 saved for retirement – double the retirement savings average of women, which stands at $45,614. Given the power of compound interest, the retirement savings gap will continue to widen if women aren’t conscious of and actively planning for retirement.

Fewer Options for Women?

Michelle Brownstein, senior vice president of the Private Client Group at Personal Capital said, “Based on the survey results, women seem to be ahead of the gender curve when it comes to positioning themselves for retirement due to their stronger belief in the importance of financial planning and professional guidance, but does this translate into actual retirement preparedness for these women? According to our results, not necessarily.”

So, why the savings shortage among women?

One big problem is that women face “unique barriers” when saving for retirement, she said, pointing to the following key findings in the study:

• 27 percent of women are not offered an employer-sponsored retirement plan (vs. 19 percent of males)
• Of women who are offered an employer-sponsored retirement plan, 58 percent actually contribute, whereas 67 percent of males contribute to their plans.
• 16 percent of women who are offered an employer-sponsored retirement plan and contribute to it do not max it out, compared to their male counterparts (26 percent)
• Despite all these numbers, 30 percent of women expect that an employer-sponsored qualified plan will be their primary source of retirement income, compared to 23 percent of men.

Women who find themselves falling behind on retirement savings say they’re not surprised.

“I am a woman who is saving for retirement and my company pays me a fair compensation, but I am still way behind my husband in the amount of savings I have,” said Priyanka Prakash, a business writer at Fundera, in New York City. “Part of that is because I took some time off when we had a baby.”

Although she didn't take much maternity time off, Prakash said that more than 40 percent of women leave their jobs completely or work part- time after having children, so they have fewer earnings to set aside for retirement. “They also tend to live longer than men, so it's a dual problem,” she said. “Less money to save from, and more years to save for,” she said.

Falling Behind for Good Reasons?

That may be true, but there’s more to the low retirement savings issue than that, women professionals say.

“I'm a woman millennial investor, and I know I've fallen behind on my retirement savings, but there are reasons for that,” said Lauren Crain, a digital marketer at Health Labs, in Houston, Texas.

Here’s how Crain breaks it down:

Stock market uncertainties are a big issue. “I typically just invest with the portfolio suggested to me by Vanguard,” she said. “I'm afraid to make adjustments and take risks because I'm afraid that I would just end up doing more harm than good.”

Her current job doesn't offer an employee-sponsored retirement plan. “In previous positions, employers offered an employee-sponsored plan that allowed me to contribute through my paycheck,” she said. “Since my current job doesn't offer that, I find it hard for me to take the time to add money to my retirement savings accounts. It's just an additional step that I'm not used to taking.”

Her current job doesn't offer 401(k) matching. “That makes it hard for me to want to save,” Crain said. “My previous job offered to match for up to six percent once I was vested for two years, but with my current position, I find it harder for me to put money into my retirement because I don't see that growth that I was used to seeing.”

Confronting Retirement Savings

Other women saving for retirement said the big reason for their success was they face the issue directly, and didn’t cede the responsibility to their spouses.

“The biggest reason I am prepared for retirement is that I took personal responsibility for it,” said Holly Wolf, director of customer engagement at SOLO Laboratories, in Kutztown, Pa. “I didn't depend on my husband to do it. I learned what I needed to do and did it.”

“Many women, including many of my friends, let their husband's handle everything,” she said. “They don't know where the money is going or how they should be saving more for retirement. They just let their husband do it.”

Household demographics and income inequality also contribute to women coming up short in retirement.

“We are getting closer to income equality, but there are many reasons why women are less prepared for retirement,” said Len Hayduchok, CEO of Dedicated Financial Services in Hamilton, N.J. “For example, the vast majority of single households have a mother as the parent. There will always be a gender difference in finances and in financial preparedness”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].

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