Everyone knows that almost no one is saving enough for retirement these days. What may be a surprise is that women trail men in retirement savings by a hefty margin, and are more likely to default on loans from retirement plans than men.

But why does this happen? And, perhaps more important, what can be done about it?

First, here are the facts, according a study from Aon Hewitt, which found that women not only save less — 6.9 percent compared to men’s 7.6 percent — and have average retirement balances of only $59,300 compared with men’s average balances of $100,000, but a third also fail to take full advantage of employer matches. Only a quarter of men fail to rake in as much as their employers will give. 

According to Olivia Mitchell, International Foundation of Employee Benefit Plans Professor at the Wharton School of the University of Pennsylvania, women fall behind men in planning for retirement for lots of reasons: “They earn less; have less time in the labor force because they take time out for families; they’re also less likely to have a company-sponsored pension or have the opportunity to contribute to a pension,” she said.

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The problem, she said, is serious because women tend to live longer than men, “so they need more savings, if anything, to last a longer time.” 

As offensive as the idea might sound, women’s financial literacy is simply not as good as men’s. And that’s true, Mitchell said, across the globe, not just in the U.S. Citing the results of a global study that asked “very simple questions in about 25 different countries,” she said, “we have a pretty global picture of financial literacy differences.” And they are legion.

“Women are less likely to understand compound interest, which is central to things like credit cards, mortgages, student loans — you name it,” she began. They’re also “slightly less informed about inflation — there’s not too much of a difference there, but they’re (also) much less aware of risk diversification. That would lead women to put too much money into a single asset: a home, for example, and not to diversify across different categories.”

Another issue is that “traditionally women have relied on their partners or spouses to handle financial affairs, and even though that’s less common than it was 30 years ago, it’s still widespread.”

Women “don’t establish credit in their own names, or have a separate checking account; that makes it difficult to establish credit if and when they need it, such as in case of a divorce or the death of a spouse. They have no experience, and may not even know the pin number for the (husband’s) online account.”

Women are also more likely to draw on retirement savings to meet other emergency expenses, and then are often caught short if they leave for a new employer — or are laid off — and cannot pay back the lump sum that they borrowed.

According to Patti Balthazor Björk, director of retirement research at Aon Hewitt, women “do tend to take loans and withdrawals at higher rates than men.” And the default rate for women is higher, too.

“They’re in and out of the workforce a little more, and if there’s a loan outstanding, they have to pay it off typically within 60 days, unless the administrator can do direct debit or take checks,” said Björk. “And that’s difficult.”

As a result, women not only lose the money from retirement savings, but because they can’t replace it on time, they also get taxed on the withdrawal. Björk added that “71 percent of women who terminate with a loan outstanding would default on the loan, compared with 64 percent of men.”

For that matter, those absences from the workforce often mean that women are in lower-paying jobs; not only does that mean they could be working for employers who may not even offer the option to save for retirement, but that they’ll have less ability to put away a portion of what they earn.

Annamaria Lusardi, the Denit Trust Distinguished Scholar in Economics and Accountancy atGeorgeWashingtonUniversity, who has worked with Mitchell on numerous projects, adds that not only do women suffer from low financial literacy, but they also have low confidence in what knowledge they do have.

In a project she worked on at Dartmouth University several years ago that was aimed at getting Dartmouth employees to contribute more to their supplemental retirement accounts, she says several interesting trends surfaced via in-depth focus groups and interviews.

“First, there are gender differences,” she said. “Women are very articulate about what they would like to do and achieve, but there is a gulf about how they are going to get there. Another thing important to consider, and why we need a special program for women, is that women don’t talk about themselves for financial security; they talk about the family. … There is often a lack of savings because women might be thinking or planning more for their children’s education instead of taking care of themselves.” Women, in other words, are far more focused on taking care of others than they are on satisfying their own needs.

Aggravating matters, women’s low financial literacy and confidence keep them from seeking advice from, say, a financial advisor.

“People who are not comfortable or do not know,” said Lusardi, “will be less likely to use an advisor because they might not understand or be able to follow the advice they get. It’s the same as with health. I have heard so many times that women talk to the doctor and feel they are not listened to. They might think the same thing will happen with financial advisors, and then they will not consult one.”

Mitchell and Lusardi both said that better financial literacy, beginning as early as possible, is one key to improving women’s savings rate for retirement. Education about the importance of the employer match in retirement plans is critical, said Mitchell, and for employers that still offer defined benefit plans, women need to learn what a lump sum vs. a lifetime payout can mean to them.

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Regarding plan design, Lusardi said, “it’s important that we recognize the differences between women and men and take them into consideration. Plan designers have to listen to what women say. If they want to design the plan, (they need to) do the work to understand the needs of women.”

More flexibility in customization would also be helpful, so that women’s particular needs are met, as would employer efforts to bring women up to speed. “The employer and the plan sponsor are low-hanging fruit in trying to design the kind of plan that responds to the needs of women. I can tell you that they are different (from those of men). The differences are stark.”

Björk pointed out that women don’t enter retirement plans as early as men do, nor do they escalate their contributions unless there’s an auto-escalation feature in the plan. “Women … tend to stay where they’re defaulted at.” Automatic features in general help women, she said: auto defaults such as escalation and, for that matter, auto enrollment.

Steven Dimitriou, managing partner at Mayflower Advisors in Boston and also president- elect of the National Association of Plan Advisors, said the industry has recognized for a while that there’s “definitely a difference in the way women perceive funding and the way they act.”

While he’s aware of several companies that have “specific education modules geared toward women,” he said, “the difficulty is at the employer level — getting them to recognize that they might move the needle in breaking up the work force and targeting education in different ways.”

Employers, he said, generally “want everybody in one meeting instead of two. It takes an engaged employer to allow either the vendors or the advisors to target specific demographics.”

“If vendors and advisors can encourage employers to gear their education programs in such a way, it would benefit everyone and actually in a roundabout way benefit employer with lower costs,” he said.

How can that be? Dimitriou explains:

“Studies show that for a company in the short term to increase its match contribution, for example, by giving employees an extra 1 or 2 percent — the difference that makes in their balances when they go to retire (can be) the difference between working till 62 vs. 65.

“That three-year difference costs the company so much more because of medical costs, lost productivity, etc. When they look at the numbers, it’s a no-brainer. Employers should contribute more to the match and encourage participation.”

Encouraging employers to “think about … the financial pressures that most women are under” can help them realize that such pressure involves “costs for a company.”

If employees, particularly women, are less worried about money, “they can be more productive,” he said.