Retirement Contributions and Gender: Why Are Women Coming Up Short?

Executive Summary What are the key defining characteristics for those who are prepared to retire? Why are a disproportionate number of women behind the curve at retirement? How should providers of retirement planning assistance adjust their communications based upon gender? This study tries to shed some light on these variables with particular focus on how gender impacts retirement contributions. While women have made great strides in terms of pay equity, positions, and power, a significant disparity still exists between men and women when it comes to being ready to retire. As employers shift to more defined contribution retirement plans versus defined benefit, the importance of understanding how employees vary in their approach to retirement is greater than ever. Women tend to need more descriptive information, additional counseling in option probabilities, and encouragement to become actively involved in retirement planning. Introduction Why are some individuals prepared for retirement while others are not? What are the defining characteristics for those who are prepared? Why are a disproportionate number of women behind the curve in preparing for retirement? How should providers of retirement planning assistance adjust their communications based upon gender? These are a few of the challenges facing investigators of the retirement planning process. This study tries to shed some light on these variables with particular focus on how gender figures into the retirement planning process. Why Considering Gender is Important An increasing number of women are employed, and they comprise almost half the workforce. Additionally, they are remaining in the workforce for significant lengths of time. This has caused researchers to focus more on women's retirement preparations. Although women have made great strides in terms of pay equity, positions, and power, a significant disparity still exists between men and women when it comes to being ready to retire. Several studies have suggested gender differences in retirement preparation, while other research has demonstrated that there are differences in the way men and women perceive financial issues (Hira and Mugenda, 2000). Traditionally, men have accepted responsibility for financial planning and women have acquiesced to men's decision making. So for older employees, vestiges of this thinking and behavior remain. It was found in the Women's Retirement Confidence Survey (1999) that many married women assume their husband will take care of their retirement planning. These same women viewed retirement as too far off to worry about it. Furthermore, when women have extra money, they often allocate it to their children, their home, or their family. Seldom will they place the money in their retirement planning accounts and some women, with the mistaken belief that others will take care of them, will cash out their retirement accounts for 'something special' for the family. Such findings have contributed to the multiple calls for additional research on the influence of gender upon financerelated behaviors and perceptions (Anthes and Most, 2000; Darley and Smith, 1995; O'Hagan, 1995; Solnick, 2001). Employers, government agencies, and women's organizations offer little pre-retirement planning education or resources designed specifically for women. Younger women are reluctant to think about planning for retirement (Alcon, 1999), and older women have been found to feel very uncomfortable and unprepared when dealing with investing and financial planning (Shaw and Hill, 2001). However, Jacobius (2001) found that 79% of the women surveyed wanted their employers to provide some kind of professional financial planning as part of their benefits package, with many women accepting the belief that they are weaker with financial concepts, putting off hard decisions, and hoping that someone else will solve their problems. Younger women have been able to alter most of these beliefs, resulting in more active planning for their retirement. …