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Why the retirement savings crisis is also a women’s crisis


Here is what we know: The retirement savings crisis is enormous. By some estimates, Americans are under-saved by up to $14 trillion. This number may in fact be understated, because it assumes Social Security and Medicare solvency – a big if. And the solutions to this problem are generally assumed to be a real negative for the economy.

But here’s the dot that few have connected: The retirement savings crisis is also a women’s crisis.

That’s because women retire with two-thirds the savings of men, live six to eight years longer and have higher medical costs. Plus, 80 percent of women are single in their final years.

And it may be getting worse: Women’s labor-force participation is dropping, which suggests we’re moving in the wrong direction, considering that retirement savings tend to be driven by lifetime wages.

By looking at this issue through the gender lens, the solutions take on a decidedly different character. They become less about an inevitable, looming wealth transfer and more about increasing the economic engagement of women. And thus the focus of the national discussions about advancing women in the workplace, the focus moves from we-should-do-this-because-it’s-the-fair-thing-to-do to we-should-do-this-because-it-helps-solve-a-ridiculously-large-problem.

Unfortunately, it’s not as simple as today’s answers of telling women to try harder or to change. Instead, it’s about making the investment to shift the workplace to a more inclusive, modern one. A good place to start is by fully valuing the work of women by closing the gender pay gap (which is, after all, the law of the land); this would in turn close the Social Security savings gap by a third, according to Social Security Works. Those higher earnings would fund retirement plans and pay into Social Security.

A second avenue is instituting longer company-paid parental leaves. Many companies, including Google, have found that longer maternity leaves mean more mothers return to work. Given that replacing a worker can cost 150 to 200 percent of their salary, this can be a smart investment for the company. And, over time, it drives higher retirement savings for the parent.

The same logic holds at the public policy level. Indeed, were the United States to leave the ranks of Papua New Guinea as one of the few countries without a government-mandated paid maternity leave, this would not just benefit those women pesky enough to have children; we would be investing in shoring up Social Security, enabling more people to pay into the system.

These actions will pay off in other ways as well. By some estimates (including from Goldman Sachs), if women were fully engaged in the U.S. economy, GDP would grow by up to 9 percent; that’s good for everyone. And multiple studies show that companies with diverse leadership teams themselves benefit, outperforming others on metrics including higher returns on capital, lower risk and greater innovation.

In fact – and to some perhaps counterintuitively – companies that adopt family-friendly policies are rewarded in the stock market.

I recognize that it can be tough to make progress on diversity. I’ve seen this firsthand. I recall one company at which I worked closing a worksite’s day-care center – without analyzing the impact on employee absenteeism or turnover (which was significant). I remember the company having flexible work programs; but employees were nervous about accessing them, for fear that they would be viewed as less committed to their jobs than those who were putting in long hours of “face time.”

I often saw the subtle biases that “we need someone we can really trust in this important job” – and that someone was typically the mirror-image of the executive making the decision – “but next time we’ll be sure to put in a woman, or a person of color or someone else who doesn’t look just like us.” But those individual decisions won the day, again and again. And thus my old industry, Wall Street, has gone backward on gender diversity.

We tend to chip away at the gender issue bit by bit. At this rate, we will achieve gender pay parity by 2058. But the discussions of the retirement savings crisis and the economic engagement of women are highly inter-related. And it’s not a question of whether we can afford to make the changes to get women more fully economically engaged – it’s a question of whether we as a country can afford not to.

Krawcheck owns Ellevate Network, a professional women’s network. She is a former head of Merrill Lynch Wealth Management and former chief executive of Smith Barney. Research support provided by Cup and Handle.

Read more:

How the pay gap leads to the retirement savings gap

Why putting off retirement savings until you make more money is a big mistake

No, shoes are not the reason why women are saving less for retirement