Women need to save more for retirement

Monday, Jul 14, 2008
Posted on Sun, Jul. 13, 2008
Study: Women need to save more for retirement



By CANDICE CHOI
The Associated Press
NEW YORK — Women may not earn as much as men or fly up the corporate ladder as quickly, but they get the last laugh because they live longer. Right?
As it turns out, women probably aren’t saving enough to bankroll those extra years in style. They invest more conservatively, start saving later and are more likely to be in and out of the work force, according to a study released recently by Hewitt Associates, a human-resources consulting firm.

Suddenly, retirement isn’t looking so rosy.

Women live an average of 22 years after retirement versus 19 years for men, and medical costs are rising, so women will need to save 2 percent more than men every year over 30 years to maintain their standard of living upon retirement, the study found.

The importance of saving didn’t dawn on Jerre Laughlin until she was in her 40s and started working in human resources.

"I was looking at pensions all day and was seeing what happens to employees who don’t save. That’s when reality set in," said Laughlin, now 63 and a resident of Kansas City, Kan. She has been playing catch-up and doesn’t plan to retire until she’s 67.

Laughlin isn’t the only one who’s learning her lesson the hard way. The Hewitt study found women today still do worse by every measure: They start saving later (by two to four years), invest less (7.3 percent versus 8.1 percent) and are in and out of the work force more often for family reasons.

The study looked at the projected retirement levels of nearly 2 million workers of varying ages at 72 large U.S. companies and used actual employee balances.

"Women tend to be a little more risk-averse, more fearful of losing money," said Alison Borland, an author of the study.

What women are doing

The study found a quarter of women didn’t contribute at a high enough level in their 401(k) plans to take advantage of the company match, which is typically 50 cents for every dollar up to 6 percent of pay. Yet women will have longer retirements than men by an average of three years.

If a woman who earns $57,000 a year raises her contribution from 2 percent to 4 percent — an extra $95 a month — she can save an extra $81,000 by the time she retires, not including an employer match.

What to consider

Because of inflation and rising medical costs, Hewitt estimates that workers will need to replace 126 percent of their salary after retirement to maintain their lifestyle. Both men and women are on track to replace an average of just 85 percent of that amount.