Faced with competing responsibilities and time out of the workforce, many American women are struggling to save adequately for retirement, the findings of a new report suggest.
According to the report by Goldman Sachs—Navigating the Financial Vortex: Women & Retirement Security—more women (50%) than men (35%) said their retirement savings are behind schedule. What’s more, 24% of women said they were “very behind schedule,” compared to 14% of men. While nearly half of women (47%) said they felt on track or ahead of schedule, substantially more men (64%) responded similarly.
Similarly, working women were less confident that they would achieve their retirement saving goals. Here, the survey found that just 14% of women said they were “very confident,” compared to 27% of men. Instead, 33% of women reported concern that they will not be able to meet their retirement goals, versus 19% of men.
And with American women living three years longer on average than men, they would typically be considered to require more savings for a comfortable retirement. Yet, most retired women (58%) report having 50% or less of pre-retirement income, including Social Security, compared to 44% of men. In fact, only 20% of women reported reaching 70% of their pre-retirement income, relative to 30% of men who reached this amount, the survey found.
Costly Time Out of Workforce
As alluded to earlier, time out of the workforce to care for children or other family members is an important factor that contributes to the financial vortex for many women.
For example, Goldman Sachs estimates that two four-year periods out of the workforce (one mid-career and one later) can reduce retirement savings up to 35%. This assumes an illustrative retirement saver who contributes 8% of their salary with 5% employer contributions from age 25 to age 65, with a 6% annualized portfolio return. To illustrate the impact of caregiving needs, the firm modeled that the retirement saver stopped saving (no employee or employer contributions) twice for four years for caregiving needs from age 31 to age 34 and again from age 62 to age 65.
Further demonstrating the reach, the survey found that more than 60% of women respondents reported retiring earlier than planned, with two thirds of this group doing so for reasons outside of their control. Only 15% of women said they retired because their “savings were sufficient to fund my retirement” versus 25% of men. The 66% of women who retired for reasons outside their control most often cited health reasons (29%), to take care of family (16%), or that their job was no longer available (15%).
“Women more often than men are forced to work part-time, spend time out of the workforce to care for young children and elderly family members, and juggle other financial priorities during their careers,” notes Candice Tse, global head of Strategic Advisory Solutions at Goldman Sachs Asset Management. “This can make their journey to retirement more difficult and incredibly personal.”
Guidance and Advice
While 69% of retired women reported that they manage their own retirement savings (versus 63% for men), women expressed quite a bit more discomfort in doing so. In this case, 63% reported stress or anxiety, compared to 52% of men, and 31% called it “very stressful,” versus 20% of men.
And despite added complexity in managing retirement savings over their careers, women were less likely than men to use outside resources for help (e.g., employer programs, financial advisors). Yet, more women (46%) considered it “very or extremely important” to receive financial advice (relative to 40% of men). Family members were the top source of this advice for women.
Topics for which women responded that they wanted guidance or advice included:
- understanding how long savings would last (34%);
- how to adjust retirement saving if it’s not on track (33%);
- retirement saving strategy (e.g., how much to save) (32%); and
- generating retirement income (32%).
“The difference in utilization of these resources highlights the gap in retirement advisors being able to meet women where they are,” observes Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management. “Personalized saving and investing strategies can enhance confidence in long-term success, particularly for women.”
The findings are based on a survey conducted among 1,566 U.S. participants between July and August 2022. Participants included 967 working individuals across generations and 599 retired individuals aged 50-75, with responses reported by gender for both populations.
