It's no secret that women have more trouble than men building for a secure retirement, mainly due to lower lifetime earnings and resulting contributions to Social Security and retirement accounts.
New research has added a challenge to the list: far fewer women than men retire with a traditional defined benefit pension or annuity.
Traditional pensions -- along with Social Security -- are critical sources of retirement security because they provide guaranteed, lifelong sources of income. That's especially critical for women, who tend to outlive men and experience higher rates of poverty at advanced ages.
Gender has a significant impact on the likelihood that a retiree will have a pension or retirement annuity from an employer, according to research by The Employee Benefit Research Institute (EBRI). Researchers found that 24 percent of men over age 50 receive pensions and/or payments from a retirement annuity, compared with just 18 percent of women the same age. The finding is based on 2008 date from the U.S. Census Bureau.
And, among men and women who do receive pensions, men also getting bigger checks -- $15,888 compared with $9,700 for women among private sector employers in 2008.
Those figures must be viewed against a broader backdrop of erosion of private sector pensions. As recently as 1980, 38 percent of private-sector American workers had traditional pension plans; by 2008, that number had fallen to 20 percent. Pensions are still much more common in the public sector, although chronic under-funding of plans by employers-along with the use of accounting tricks to paper over problems-has created huge shortfalls in the amount of assets needed to cover obligations.
The participation gap also exists in defined contribution retirement products, such as 401(k) plans. A survey of nearly 3,600 Americans workers released earlier this year by the Transamerica Center for Retirement Studies showed 70 percent of women were participating in a workplace retirement plan in 2009, down from 78 percent in 2007. Meanwhile, the percentage of men participating in a plan rose from 76 percent to 82 percent over the same time period.
EBRI's research suggests that the key culprit here is the lower rate of labor participation among women who were over age 50 in 2008, when the Census data was gathered. Younger women today participate in the labor force in higher numbers, but there is still a gap, due mainly to care-giving for aging parents or children.
And, many women still earn lower wages than men in many occupations. All told, women earn about a third less than men make during their working lives. That translates into lower income later from pensions, which are determined largely by salary history.
Financial illiteracy is another worry. Research by The Wharton School's Boettner Center for Pensions and Retirement Research shows that women are less likely to understand the stock and bond markets and risk diversification. The Center's research also shows that low literacy levels leads women to under-invest in stocks and tax-favored assets, which leads to sub-par long-term returns.
"Traditionally, husbands paid the bills and balanced the check book, and women managed the household," says Olivia Mitchell, a professor at the Center and a Wharton professor. "But with 50 percent of marriages ending in divorce, the specialization means that women end up single without any knowledge about where their money is or how it's invested."
Perhaps most worrisome, most women aren't aware of the retirement security challenges that they face. "There is still a perception that 'it wont happen to me,'" says Manisha Thakor, an expert on personal finance for women and author of Get Financially Naked: How to Talk Money with Your Honey (Adams Media, 2009). "I have yet to meet a woman who isn't surprised to learn that we earn 77 cents on the dollar, even 11 years into the workforce."
Thakor adds that it's particularly important for younger women to take action early to build for retirement. "The three most important words are 'start saving now.' It's so important and so many women put it off and don't save until it's very late. If they understand those words in their 30s and 40s, the power of compounding can make up for a fair amount of the headwinds."