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Retirement Savings Roadblocks for Women in the Workforce

Chris Magno

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From economic pressures to Social Security misconceptions, women face unique challenges in retirement planning. Traditional approaches aren't working to close the gap, but new workplace saving solutions could be the key to reversing this trend.

The financial landscape for working women has evolved dramatically. Today's women have a stronger presence in the workforce, they're earning more degrees and they're accumulating greater wealth.

But new research reveals that despite these achievements, women continue to face significant obstacles in building adequate retirement nest eggs. And even though more women are enrolled in their employer's retirement plan, they're facing a future with significantly less in retirement savings.

The troubling trend

According to ADP's Women and Investing study, the most striking development is the increase in women with limited retirement savings. In 2020, 48% of women had less than $100,000 saved for retirement. Today, that number has jumped to 76%.

The situation is even more concerning for women nearing retirement age:

• 63% of women ages 50-59 have $100,000 or less in retirement plan savings
• 56% of women ages 60-65 face the same predicament
• 75% of women over age 50 have under $100,000 in outside savings

"While it's extremely energizing to be part of a generation of women who are making such significant strides in the workplace and paving the way for future generations, it's clear we still have a long way to go to help women be able to save and retire comfortably," says Richelle Sheehan, Operations Executive for ADP Retirement Services.

"In my opinion, there are likely multiple factors at play here, including the gender pay gap, which varies by state, and career interruptions women are faced with when having to take time off work to care for children or elderly family members. These interruptions can significantly reduce lifetime income and retirement contributions overall," she explains.

The perfect storm: Understanding contributing factors

So what's behind the troubling decline in women's retirement savings? A combination of factors is converging to create this crisis.

Economic pressures

Inflation erodes purchasing power, making it harder to set aside money for the future. And market volatility has also impacted existing retirement accounts, potentially diminishing hard-earned savings.

Debt burden

Many women are juggling multiple financial obligations — from student loans to mortgages and credit card debt. These debt payments often take priority over retirement contributions, creating a long-term savings deficit.

Spending patterns

Rising costs of essentials like housing, healthcare and childcare often leave little room for retirement savings in many women's budgets.

"With inflation pushing up costs in the economy, it's likely that some women are spending more of their income on essentials instead of saving for retirement," Sheehan points out. "In general, women spend more on healthcare due to longer life expectancy and other specific health-related needs. These expenses, in addition to the increasing cost of childcare, truly limits the amount in which women can contribute to retirement savings."

Uncertainty

Thirty-six percent of women acknowledge not knowing how much they need for a comfortable retirement. And 60% are potentially overestimating Social Security's role, believing it will provide up to half of their monthly retirement income.

Bridging the retirement readiness gap

Enhancements to workplace retirement plans could make a significant difference on women's retirement savings, including:

• Financial wellness resources like budgeting and debt management tools, and education programs about retirement planning

• One-on-one retirement planning consultations, customized savings recommendations based on age and circumstances, and other personalized support resources

• Automatic enrollment, matching contributions and catch-up contribution education to incentivize savings

Connecting women to retirement solutions

By leveraging available resources and support, women can work toward creating more secure retirement futures. But it's up to plan sponsors to take action, offering a plan that sets them up for success.

For organizations that are considering making a change to their plan provider — or seeking options to the available state-mandated plans — it's important to be mindful of resources and support options that are valued across the workforce.

Have questions? ADP can help — learn about retirement plans that meet your business needs.

^{ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.}

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