The Washington PostDemocracy Dies in Darkness

Women hope for a leisurely retirement, but many fear financial stress or even poverty

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Retirement is supposed to be a time for relaxation, to spend time with family and friends, to take up gardening or volunteering, and generally to be free from financial worries.

Yet, for a substantial number of women, the thought of retirement calls up negative feelings. Will they have enough money when they retire, or worse, will they live out their golden years in poverty?

These dismal findings are particularly severe for women around the world. When asked what words they associate with retirement, nearly one in five women said “poverty” and one in four said “insecurity.”

American women aren’t immune from these fears. About one in 10 American women fears that poverty will define retirement while one in seven says that retirement will be associated with insecurity.

Those conclusions come from a survey of more than 16,000 people in 15 countries conducted by Aegon UK and the Transamerica Center for Retirement Studies and reported by Plansponsor. Women made up half of those surveyed, and more than half of these women had at least an undergraduate college degree, 62 percent were married or cohabitating, and 65 percent worked full time. The countries include Brazil, Britain, Canada, China, France, Germany, Hungary, India, Japan, the Netherlands, Poland, Spain, Sweden, Turkey, and the United States. Details are available in “The Changing Face of Retirement. Women: Balancing family, career and financial security” available on the Aegon Web site.

Not having enough money can cause financial stress throughout life, of course. And one reason that financial stress may be a feature of retirement is that women aren’t putting enough money away to fund their retirement.

Worldwide, just one of every five women thinks she’s saving enough to have a financially secure retirement, and two of every five women have no idea whether they’re on course to retire in financial security.

The situation isn’t much better in the United States. Among American women, just 15 percent say they’re putting enough money aside, while 22 percent say they’re hardly saving at all for their retirement.

A not insignificant share of women isn’t even interested in saving for retirement. In terms of how they approach the need to save, fully 8 percent of women say they have never saved and never intend to save for retirement.

Not having enough money in retirement is a big problem, especially since a 65-year-old American woman is likely to live another 21 years and will need a pretty big nest egg to meet her retirement needs. Yet, only one of every four women thinks she’ll have enough income during her retirement to meet those needs.

Most retired American women won’t end up in poverty, of course, yet it’s eye-opening that such a large share of women fears financial insecurity or poverty in their retirement years.

Why is that? Well, beyond the fact that many people aren’t saving enough, a big part of the problem is that people don’t know how to figure out how much money they’ll need in retirement. If they can’t figure out how much they’ll need, then it’s hard to put aside enough money to meet those needs.

To illustrate the problem that not having any savings can create for tomorrow’s retirees, I used a calculator from Kiplinger’s business magazine to figure out how much a person who plans to retire in 20 years would need to start saving to have a comfortable retirement. Specifically, I assumed that I wanted to replace 65 percent of a $50,000 income (that’s roughly a household’s median income) during a retirement that would last 20 years and made the extreme assumption that I had no other savings, had no pension, and wouldn’t receive any Social Security benefits.

Under this scenario, I would need to save about $1,500 each month to reach my goal. Unfortunately, if I’ve only decided to start saving just 20 years before I plan to retire, with my $50,000 income, I may not be able to afford to put aside $1,500 a month to fund my retirement.

There are a couple of things that would make it easier to save for retirement. Both of them operate through the employer.

First, since a lot of retirement savings occurs on the job through employer-sponsored plans, employers could make retirement benefits, including matching contributions to a 401(k) plan, available to all employees, not just to those who work full time. This would be a simple way to help all employees start building a nest egg and would specifically benefit women, who are more likely than men to work part time.

Second, since defined contribution plans have largely replaced traditional defined benefit pension plans, meaning that employees are now responsible for making contributions to their retirement plans, employers could make it easy for employees to start saving by automatically enrolling them in retirement saving plans.

Requiring employees to “opt out” rather than to “opt in” to retirement savings plans would act like a forced saving plan and overcome the inertia that stops people from putting money away into a savings account.

This is a good idea, and it’s supported by research. A recent government report found that providing automatic IRAs could both expand retirement coverage and increase retirement benefits for all households. (Some 401(k) and SIMPLE IRA plans already have automatic enrollment.)

The rather broad-based support for automatically enrolling people in savings plans is based on a concept developed a few years ago by researchers at the Heritage Foundation and the Brookings Institution. President Obama has included a provision to provide for “Automatic IRAs” in each of his budgets. Rep. Richard Neal (D-Mass.) has introduced legislation that would provide similar benefits.

These are good ideas. But women shouldn’t wait for their employers or for Congress to act to avoid a retirement that could sink them into financial insecurity or poverty. Women need to think long and hard now about how to make sure they have enough money during their retirement years. They should take advantage of the benefits that their employers offer and start contributing to their 401(k) plan. And, if such options aren’t available, they should set up their own tax-deferred savings accounts. There’s no reason for so many women to fear that retirement is a life of poverty rather than the life of relaxation that they have earned.