Women and Retirement: A 21st Century Reality
By: Global Coalition On Aging
Tags: Workforce, Business, Finance, Retirement, Aging

At a time when COVID-19 is generating massive financial uncertainty for individuals, companies, and societies, an important new report from Bank of America, Gender Lens in Defined Contribution (DC) Plans, examines the unique saving and investing challenges facing women. It marks the launch of a new research series that applies a gender lens to financial behaviors — a critical topic in a world where lives, and financial needs, routinely stretch to 100.

As Lorna Sabbia, Managing Director and Head of Retirement & Personal Wealth Solutions at Bank of America, so powerfully communicated at the Global Coalition on Aging’s first Silver Economy Forum last July in Helsinki, Finland, “the number one concern by far, regardless of age, is the topic of health,” in large part due to uncertainties about having “enough money to cover those costs, especially in retirement,” and now presciently and perceptively applies this thinking specifically through the gender lens.

The new report reveals a significant gender gap in Americans’ 401(k) savings. Based on an analysis of 4.6 million plan participants, it finds that the median 401(k) balance for women is just two-thirds that for men, and this gap persists across generations and wealth levels.

This challenge is especially urgent given that women need resources for lives that last longer, on average, than men. Yet women continue to earn less than men, and many drop out of the workforce to serve as caregivers, both at the childcare and eldercare ends — sacrificing income, savings, and other benefits. They also face greater risk for certain health conditions, such as Alzheimer’s disease — clearly a disease profoundly associated with aging, which therefore increases burdens on society as populations age — that can generate immense care costs.

Bank of America underscores that solving this challenge will require innovations to help women begin saving earlier, maximize their contributions, and make the right investment decisions at the right time. However, this is just the beginning of what’s possible, as individuals, employers, and policymakers can also fundamentally reimagine the assumptions of working, saving, investing, and spending for today’s longer lives.

Twenty-first century solutions are required for 21st century challenges!

The report highlights a number of opportunities for progress:

Maximizing savings and investments. Bank of America’s report provides suggestions that can help individual women to promote and protect their financial wellness. For example, the research finds that women participate in 401(k) plans at lower rates than men, so beginning to save early and maximizing contributions is critical as these early and consistent savings have remarkably positive multiplier effects. Women can also continually consider specific investment decisions, like whether to increase their equity allocation, and avoid withdrawing funds from their 401(k) plans. These personal finance behaviors provide the all-important baseline for lifelong wealth, and they are more important than ever as aging and longevity continue to accelerate.

Bank of America’s report provides suggestions that can help individual women to promote and protect their financial wellness. For example, the research finds that women participate in 401(k) plans at lower rates than men, so beginning to save early and maximizing contributions is critical as these early and consistent savings have remarkably positive multiplier effects. Women can also continually consider specific investment decisions, like whether to increase their equity allocation, and avoid withdrawing funds from their 401(k) plans. These personal finance behaviors provide the all-important baseline for lifelong wealth, and they are more important than ever as aging and longevity continue to accelerate. Extending careers. While investment decisions within 401(k) plans are important, there are also a number of broader decisions that can dramatically improve financial wellness, such as continuing to work and save past traditional 20th century “retirement age.” To enhance their income and 401(k) savings, women can consider how flexible work arrangements, lifelong learning, and skills development can enable them to extend their careers or launch second careers. The idea of stopping all work at age 60 or 65 is badly outdated — and moving beyond it opens new opportunities for generating wealth later in life, in addition to the value it brings to a healthier aging itself.

While investment decisions within 401(k) plans are important, there are also a number of broader decisions that can dramatically improve financial wellness, such as continuing to work and save past traditional 20th century “retirement age.” To enhance their income and 401(k) savings, women can consider how flexible work arrangements, lifelong learning, and skills development can enable them to extend their careers or launch second careers. The idea of stopping all work at age 60 or 65 is badly outdated — and moving beyond it opens new opportunities for generating wealth later in life, in addition to the value it brings to a healthier aging itself. Supporting working caregivers. As described in the report, two-thirds of caregivers are women, who must often scale back their hours, leave their jobs, or deplete their savings due to their care responsibilities. And these impacts are only more apparent in the midst of the COVID-19 pandemic. Given this need, employers can play a critical role by providing the policies and resources to help their caregiver employees stay in the workforce. This will not only help women save — it will also drive recruitment and retention, maintain a valuable pool of talent, and facilitate innovation for the vast market of older consumers.

As described in the report, two-thirds of caregivers are women, who must often scale back their hours, leave their jobs, or deplete their savings due to their care responsibilities. And these impacts are only more apparent in the midst of the COVID-19 pandemic. Given this need, employers can play a critical role by providing the policies and resources to help their caregiver employees stay in the workforce. This will not only help women save — it will also drive recruitment and retention, maintain a valuable pool of talent, and facilitate innovation for the vast market of older consumers. Embracing healthy aging. Women face a disproportionate risk for certain age-related diseases, such as Alzheimer’s and osteoporosis, which can bring significant out-of-pocket costs for them personally and exponentially grow system-wide health spending. Therefore, just as women are well-advised to begin saving early, they should also embrace healthy, active aging beginning early and continuing throughout their lives. This can mitigate the risks and impacts of chronic conditions that carry potentially disastrous costs, enabling women to protect their savings.

The financial challenges of longevity require a broad set of solutions, from increasing savings and working longer to championing employee-caregivers and reducing healthcare costs. Bank of America’s new research series is a key step forward in this area, providing insights that can help women, men, employers, and other stakeholders to find a path for lasting financial wellness. But then what would you expect from the leading global financial services company which has brought health and gerontology expertise in-house?Innovative and creative solutions linked to the 21st century mega-trend of aging has become a hallmark for Bank of America. In this report, setting their sights specifically on financial solutions for women in the context of a 100-year-life goes well beyond the financial to apply their strategic value in the longevity space, from which we all benefit.