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How the Pandemic Further Undermined Women’s Retirement Security

Industry Trends and Research

Women continue to face greater retirement-related risks than men and the pandemic has made them even more vulnerable, a new study suggests.  

More than half of working women (51%) indicate their financial situation has been negatively impacted, according to Life in the COVID-19 Pandemic: Women’s Health, Finances and Retirement Outlook from the Transamerica Center for Retirement Studies (TCRS) in collaboration with the Transamerica Institute. “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,” notes Catherine Collinson, CEO and President of Transamerica Institute and TCRS. 

As part of TCRS’ 21st Annual Retirement Survey of Workers, the study examines the retirement outlook of women in the workforce based on a survey of employed workers conducted in late 2020. Key findings include that: 

  • 42% of women workers experienced one or more impacts to their employment because of the pandemic, including reduced work hours (28%), reduced salaries (13%), furloughs (9%), layoffs (8%), and/or early retirement (3%); 
  • 60% made adjustments due to pandemic-related financial strain, such as reducing day-to-day expenses (35%), dipping into savings accounts (25%), and accumulating new credit card debt (17%);
  • approximately one in eight women skipped health care (13%), borrowed money (13%), and reduced or stopped contributing to retirement accounts (12%); and  
  • 62% cite paying off some form of debt as a financial priority. 

Expectations and Preparations

On a positive note, the survey found that more than three in four (77%) are saving for retirement through employer-sponsored plans and/or outside the workplace (e.g., in IRAs, mutual funds or bank account). That said, some are also taking loans and early withdrawals from retirement accounts. Here, TCRS found that 27% of women have taken a loan, early withdrawal and/or hardship withdrawal from their 401(k) or similar plan or IRA at some point. (The study also shows that 38% of men have done the same.)  

And while many women expect their primary source of retirement income to be self-funded savings from a 401(k)/403(b)/IRAs and or other savings and investments (47%), TCRS notes that household retirement savings are alarmingly low. According to the findings, women report having less than half of the total household retirement savings reported by men: $57,000 among women compared to $118,000 among men (estimated medians). Men (35%) are more likely than women (24%) to have saved $250,000 or more in total household retirement accounts. TCRS further notes that a “worrisome” 24% of women have saved less than $10,000 or nothing at all.

“Amid the formidable challenges and setbacks of the pandemic, women continue to have big dreams and are focused on their future retirement. However, despite their efforts, many are not saving enough to be able to enjoy a comfortable lifestyle in retirement,” Collinson observes. Overall, 55% expect to work past age 65 or do not plan to retire and 53% plan to continue working at least part-time in retirement. The study notes that 83% of these women workers cite financial reasons for planning to do so, while almost as many (77%) cite aging-related health reasons.

Moreover, less than one in five are “very” confident that they will be able to fully retire with a comfortable lifestyle (18%) and the same percent of women workers indicate their retirement confidence has declined because of the pandemic.

Improving Financial Security

Acknowledging that many businesses were hit hard during the pandemic, the study suggests that as the economy recovers, it is important for employers to recognize the vital role they play in supporting their employees’ long-term health and financial well-being. “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,” says Collinson.

As such, the study offers a number of recommendations for policymakers, women and employers. Among TCRS’ recommendations for employers to help support their employees are to: 

  • offer flexible work arrangements that support work-life balance, and workplace and financial wellness programs; 
  • offer a retirement plan or achieve efficiencies by joining a multiple employer plan (MEP), a pooled employer plan (PEP), or a group of plans (GOP); 
  • extend benefits eligibility to part-time workers, including retirement plan offerings;
  • promote the benefits your company offers, including retirement planning and educational resources available through your retirement plan provider;   
  • offer pre-retirees assistance in planning their transition into retirement, including education about retirement income strategies, retirement plan distribution options, Social Security and the need for a backup; and 
  • create opportunities for workers to phase into retirement by allowing for a transition from full-time to part-time and working in different capacities or different locations. 

The findings are based on an online survey conducted by The Harris Poll on behalf of Transamerica Institute and TCRS between Nov. 17 and Dec. 29, 2020, among a nationally representative sample of 10,192 respondents. The data in the report is shown for a subsample of 3,109 adult workers in for-profit companies.