Recently, 65-year-old “Ellen” came in to a TIAA-CREF office concerned she would lose her home and would never be able to retire. Our financial consultant talked her through her options, including several Social Security strategies. Ellen realized she could keep her home and retire whenever she’s ready, income intact, and she gave her consultant a big hug as she left.
More and more women are finding their financial stories have a happy ending, as women, especially college graduates, earn more money than ever. Women now control or influence 53 percent of all U.S. financial assets. We’ve come a long way, but in terms of how we invest for the future, we have farther to go.
The Savings Gap
We are literally shortchanging ourselves by failing to save enough money for retirement. We put aside an average of 6.9 percent of pay, compared to 7.6 percent for men, according to an Aon Hewitt study. TIAA-CREF research found that ten percent more women than men leave money on the table by contributing less than the amount that their employer will match in their retirement plan, while other research found that women are less confident than men about what we are doing with those savings, with only 26 percent reporting feeling confident making investment decisions.
We face other obstacles during our saving years as well. Many women take time off from careers, often to raise children or care for aging parents, resulting in an average of 11 years of missed savings, according to AARP. We’re often too busy running households (including managing the lives of everyone living in those houses) and working to focus adequately on savings and investment strategies for retirement. And, unfortunately, a recent TIAA-CREF survey showed that women are more likely than men to borrow from their retirement plan to simply pay off debt.
As a result, a benchmark study found that the average retirement plan balance is just $59,300 for women, compared to $100,000 for men.
And once we retire, we face new challenges. We will live about five years longer than men on average and are more likely to require long-term care. Therefore, our savings need to last longer. Even though it’s increasingly common for women to live for 25 or 30 years in retirement, few have made plans to do so.
Getting Smart about Your Money
Clearly, every woman should take responsibility for her own financial future, but we can use some help clearing these hurdles. I believe that employers and the financial services industry have a moral responsibility to create innovative programs that give women fresh confidence to save for a secure financial future. Society as whole will benefit.
At TIAA-CREF, the majority of our customers are women—professors, K-12 teachers, administrators in higher education and healthcare, curators and others. We feel a huge responsibility to help them get ready for a comfortable retirement.
We believe it’s important to understand the psychological dynamics behind how women save, and the resulting economic consequences, as well as how women prefer to receive financial advice. Our experience shows that when women engage in financial planning, they are more likely than men to act on advice they receive. According to our research, nearly 90 percent of women take action after receiving financial advice to execute on their plan. Yet more than a third of women say they don’t have time to look for it. We’ve launched a landmark study to identify the language, messages and themes that may resonate with and inspire our female investors.
We must also encourage more women to become financial advisors. Forbes recently reported that only 25 percent of Certified Financial Planner professionals are female, but in our experience, women often understand, respect and appreciate financial advice from other women more than they do from men.
Secret to Many Women’s Financial Success
Among the best assets for women, it turns out, are the insights and guidance readily available from other women. We regularly invite women to workshops where they can get information from a professional that will bolster their financial well-being, but also exchange ideas with one another. Nearly three-quarters of the women who have joined one of our workshops then increased their retirement plan contributions. We also have created an online community where women can share financial tips with each other and check in with experts for help.
Women have made such tremendous progress in the workplace in recent decades that we deserve an equally successful retirement. If we take advantage of the resources and education available to us, there’s no reason we can’t have one.
Teresa Hassara will be introducing the panel session, “Life Balance and Survival Strategies in a ‘Lean In’ World,” at the 2014 Massachusetts Conference for Women.