A new survey by Massachusetts Mutual Life Insurance Co., released Thursday, finds that a gender gap exists in women’s preparedness for retirement.
Only one in seven women in the poll said they were very knowledgeable about managing their savings and investments, compared with one in three men.
Moreover, 43% of women, and 46% of pre-retired women, were uncertain how long their savings and investments would last in retirement, versus 33% of men.
(Related: Women and Men Give Differently in Retirement)
The survey found that this high level of uncertainty contributed to a big income gap. Women on average anticipated living 25 years in retirement, but having sufficient income for only 20 years.
Men on average were confident they would have enough in savings — indeed, that their savings would outlast them by two years.
“The difficulty that many women face in preparing for retirement leads many to anticipate living less comfortably in retirement and running out of money five years too soon, a stunning development from a retirement-planning perspective,” Teresa Hassara, head of MassMutual’s workplace solutions, said in a statement.
Beyond savings, women in the study were less confident than men about more complicated aspects of financial management:
- How to optimize Social Security: 66% vs. 76%
- How to generate lifetime income: 60% vs. 72%
- How to meet retirement lifestyle goals: 58% vs. 68%
“There are many barriers that make it more challenging for women to prepare to retire, a reality that we need to overcome if women are to enjoy a secure retirement,” Hassara said.
She said the study showed that many women were less comfortable with financial issues and money in general, making it critical for them to have access to more education, professional financial advice, planning tools and other resources to meet those challenges.
Greenwald & Associates conducted the online survey in January, involving 804 pre-retirees and 801 retirees, all of whom were at least 40 years old.
Pre-retirees were required to have a household income of at least $40,000, work full time for a private-sector employer and be participating in that employer’s defined contribution retirement plan. Retirees were required to have total investable assets of at least $100,000, to have retired from a private-sector employer and to have been participating in that employer’s DC plan at the time of retirement.
How Much Risk?
Women in the survey expressed more concern than men about a major bear market, stock market volatility in general, taking too much investment risk and making a poor investment decision.
Overall, 81% of women said they were uncomfortable taking investment risk, compared with 71% of men. Retired women were especially were discomfited by investment risk as only 64% were content with taking on at least some risk, compared with 72% of retired men and 74% of pre-retired women.
Higher levels of discomfort with financial risk among women showed up in their current investment allocation. They were more likely than men to describe their current investment mix as a balance of growth and preservation, while men were likelier to say theirs was tilted toward growth.
MassMutual noted that women’s risk aversion may be misaligned with their long-term goals. Nearly two-thirds of women strongly agreed that they wanted their investments to continue growing in retirement, compared with a little over half of men.
One interesting note: Whereas most advisors tend to encourage more conservative investing in retirement, women with an advisor were likelier than men to report that their advisor had suggested they invest more aggressively.
“Retirement plan providers and financial advisors need to do a better job of connecting with women, providing more education to help them become more comfortable with longer-term investment concepts such as taking smart risks, meeting income needs and how to balance growth and preservation,” Hassara said.
Open to Financial Advice
The survey results showed that women were less familiar than men with certain types of investments, including actively and passively managed mutual funds, customized investments and target date funds. Although TDFs aim to streamline investment allocation, only 57% of women found them easy to use, compared with 65% of men.
Women were less likely than men to actively monitot their finances, according to the findings. Less than half of women checked their investment performance weekly, versus two-thirds of men. And three-quarters of women versus about two-thirds of men preferred an investment option that let them “set it and forget it.”
Although women tended to be less familiar than men with investment options and less proactive in financial management, the survey found they were open to education and advice. Sixty-one percent of women preferred to delegate financial decisions, versus 45% of men.
The survey found that 72% of women in the sample were currently working with a professional financial advisor, compared with 57% of men. Not only that, but 79% of retired women were receiving financial advice, compared with 68% of both retired men and pre-retired women.