Can Women Bridge the Retirement Savings Gap? - BusinessWeek Report

Ellen Hoffman, columnist for BusinessWeek writes, "Can Women Bridge the Retirement Savings Gap?" Let's go backwards first and visit the possible reasons listed for the aformentioned gap:

There are plenty of measurables, documented reasons for women's lower retirement savings. Women spend less time in the labor force, often because of care-giving demands, and/or are more likely to work part-time at some point. They earn about 80 cents on the dollar compared with men. And they're less likely to participate in some type of pension plan. The fact that, on average, women tend to live three years longer than men and live alone for more years intensifies the effects of the savings gap, making it even more crucial for them to prepare better for their golden years.

Two studies, one each from Vanguard and Hewitt are cited supporting the comparison of actual average balances for women and men:

Vanguard, a mutual fund company that also manages retirement plans, reported that in 2007 the average account balance of more than three million participants in their 401(k) plans was $56,723 for women, compared with $95,447 for men. More recently, Hewitt Associates consultants surveyed nearly 2 million participants in large-company 401(k) plans the company manages and found that women had an average of $56,320 in their accounts, compared with over $100,000 for men.

These are sobering statistics. Ms. Hoffman offers some common sense tips for improving women's savings rates (they basically apply to everyone):

• Start saving as soon as you begin working


• Design and follow a realistic budget that allows you to join your employer's retirement plan


• Contribute as much as you can to your company plan or


• If one is not available—contribute to an IRA


• Don't take money out of retirement savings to meet short-term needs

Ms. Hoffman also helpfully points out that this savings gap is an issue not just for low-earners:

Linda E. Katz, a financial planner in Huntington, N.Y., says she sees the same problem for women in middle management. Some of them, especially those who live in high-income areas, simply don't make enough money to save much. She also says that she sees quite a few clients who allow financial demands from their children and parents to trump putting away money for their own retirement.

Executives and professional women also need to pay more attention to their future, says Margaret K. O'Meara, a financial planner in Red Bank, N.J. For the high-income women she counsels, "the biggest things are the lifestyle and longevity issues," she says. Her clients may make $250,000 or $300,000 a year and still be behind on retirement saving. One of her clients in her 40s in this income range wants to leave her high-stress job to retire or downsize to part-time work, but she doesn't want to sacrifice the family vacation home or luxuries such as expensive wines and food to save for what could be as much as 40 or 50 years in retirement. Some women also lose a chance to catch up on saving by refusing to charge their college-graduate children for rent, cable TV, or other amenities.

Ms. Hoffman mentions a great reference for women savers: Women's Institute for a Secure Retirement, or WISER at http://www.wiserwomen.org/ which contains a wealth of helpful information.