TIAA warns that women are unprepared for retirement

Men and women spend a lifetime racing toward retirement, yet women are still coming in last place with their savings. 

Research from the TIAA Institute found that women have 30% less retirement savings than men, and separate research from AARP found that a quarter of women nearing retirement age don’t feel confident they’ll have enough money to support themselves. 

One glaring reason for the gap in retirement savings is the gap in wages: women still make 83 cents to every dollar a man makes, which adds up to half a million dollars in lost wages over the course of a woman’s career, according to data from the Bureau of Labor Statistics. 

“If you earn less, it's safe to assume you have less to put aside for retirement,” says Anne Ollen, the TIAA Institute’s managing director. “Also, since many retirement plans’ contribution rates are wage-based, women's lower salaries impact how much their employers are contributing on their behalf. They have less money to save and employers are putting away less for their women employees.” 

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In reality, women may need more money than men in retirement — they typically live longer and have higher healthcare costs. Additionally, women typically retire around five years sooner than men, meaning their savings needs to last, and they may face more penalties for dipping into it before reaching full retirement age, Ollen says. 

According to the TIAA Institute’s Personal Finance Index, which gauges financial literacy based on a 28-question survey, women have lower rates of financial literacy than men, which makes them more “financially fragile,” Ollen says. This should signal to employers that more care needs to be made in their approach to financial wellness benefits and how they market them to employees. 

“Those with lower levels of financial literacy are more likely to have difficulty making ends meet and be debt-constrained,” she says. “We know that financial advice needs to be tailored to go deeper into understanding the difference not just in literacy levels, but also in attitudes toward receiving information.” 

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For example, Ollen says employers should focus on improving women’s risk tolerance with investing, an area of low financial literacy for this population. Women also respond better when given anecdotal advice by other women, a tactic more employers can employ in their educational offerings. 

“Financial education should address the fact that women prefer hearing from female advisers and they prefer hearing advice in the form of stories over a lot of statistical or numerical presentations of information,” Ollen says. “So it’s the approach, as well as targeting audiences to meet them where they are.” 

Ollen also encourages women to set up automatic contributions into their retirement accounts, instead of waiting to invest only what’s left over, which can help them make a consistent habit of saving. Starting early, saving often, and taking advantage of an employer’s match can also help women stay on track. 

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“We need to get the message out that compounding is extraordinarily powerful. The sooner you start to save, the better,” she says. “If you make $55,000 a year and you save 3% of that salary, your employer could match that for 3%. That's $1,650 from you and another $1,650 from your employer. If you don’t save that, you’re leaving free money on the table. These are the messages we need to get to more women.” 

Yet the individual actions of female employees can only go so far — Ollen says it’s imperative that the government enact laws and policies that ensure retirement stability not just for women, but for everyone. Currently, the SECURE Act 2.0, which was passed by the House of Representatives in March, plans to expand access to workplace retirement plans, as well as provide additional provisions like matching student loan repayments, a common hurdle to retirement savings. 

Additionally, new legislation introduced by the National Alliance for Caregiving, the Social Security Caregiver Credit Act, would allow for up to 80 hours of unpaid caregiving to be added to their total earnings for Social Security benefits. 

“It’s a problem for society if social security is in a precarious state and our oldest citizens need support and the government can’t provide it,” Ollen says. “It will have a trickle-down effect on multiple generations. Having these things recognized and addressed through policy is a big step forward.”