Goldman Sachs Report Highlights Challenges American Women Face Saving for Retirement
New York, April 15, 2024 — Women face unique challenges saving for retirement because of decades-long income differences, increased caregiver responsibilities, insufficiency of part-time work, longer life expectancies, and lower benefits from US Social Security. The newly released supplement Challenges Women Face Saving for Retirement, from the annual Retirement Survey & Insights Report by Goldman Sachs Asset Management, explores some of these challenges and points to potential solutions that may improve American women’s retirement security.
A powerful financial vortex of personal and economic factors and often unexpected life events continues to impact the retirement preparations of many Americans, despite improvements in economic and market conditions. These obstacles can especially impact the ability of women to save, short-term and for retirement, often with significant negative cumulative effects.
Income disparities alone can lead over time to a 24% shortfall in women’s retirement savings.
Yet we believe there is room for optimism. Our survey of 5,261 Americans shows marked improvement in the retirement outlook of working women. This includes lower stress managing savings, higher confidence in their ability to meet their goals, and an increase in savings over the prior year.
“In retirement savings, the solutions often seem obvious: save more, save early, and invest consistently,” said Marci Green, Managing Director and Head of Retirement Intermediary Distribution at Goldman Sachs Asset Management. “But this is an ‘easy to say, hard to do’ problem for many, especially women.”
“To meet these challenges, women need more personalized and multifaceted approaches,” Mrs. Green added. “Enhancing financial education, expanding access to professional advice, and providing broader customized retirement solutions and guaranteed income options are all important steps to help women build confidence in the retirement process. Retirement is a very personal journey and knowing you are on track can provide significant peace of mind.”
Caregivers Face Greater Impacts from the Financial Vortex
Financial vortex describes the economic, market and personal worries Americans face, often harming financial health and derailing retirement savings. Women continued to make progress in preparing for retirement – but significant headwinds remain, especially for caregivers.
61% of US family caregiving is managed by women1. In our survey, 40% of working women report leaving a job for caregiving (childcare and eldercare); 21% report leaving a full-time job for part-time work for caregiving; and women are twice as likely as men to leave the workforce for more than a year. Caregivers report markedly greater Financial Vortex impacts
Other key findings in this year’s report include:
- Unplanned Retirement is Major Risk: While surveyed women report planning to retire later than men (typically between ages 65 to 69), almost half of retired women report retiring earlier than planned. Notably, retired women often report retiring for different reasons than they planned, such as declining health, caregiving, or loss of job.
- Improved Sentiment and Lower Impact of Competing Priorities Over Last Year: Lower inflation, rising capital markets, and reduced recession risk is correlated with women reporting more confidence, and less impact from competing priorities. Yet the opposite was true for male respondents, who report higher impacts from competing priorities.
- Risk v. Reward Differences: To help understand the divergent attitudes between men and women regarding competing priorities, we consider the potential impact from our behavioral finance analysis1. Women’s responses correlate more to a risk-oriented and present-focused mindset, while men’s correlate more to reward-oriented and future-focused mindset. In improving market conditions, women may feel more confident about near-term financial priorities, while men may be more confident and action-oriented about long-term opportunities.
- Income Guarantees: Rather than solutions that help manage income, women express preferences for income that is guaranteed. 57% of women report wanting income that is consistent and stable and 52% want income that is guaranteed for life, compared with 45% and 44% for men, respectively.
“Retirement savings disparities are being broadly felt across the US population, and they are growing,” said Chris Ceder, Senior Retirement Strategist at Goldman Sachs Asset Management.
“Over the last 30-plus years, the top 20% of retirement savers have done well. Meanwhile the bottom 80% have seen limited retirement savings progress. That 80% encompasses many demographics, all with unique challenges. We as retirement professionals must do more to help women and men maximize their working earnings, save enough, and invest well as they seek to provide for themselves and their families.”
To illustrate the potential scope of this problem, 28% of retired women in our survey report having less than $50,000 in retirement savings, with only 44% reporting more than $200,000. By contrast, 24% of retired men report less than $50,000, and 54% report more than $200,000.
Assuming a 4% withdrawal rate, $50,000 in retirement savings provides $2,000 of income per year. At these levels Social Security benefits are an essential part of retirement income strategy. However, according to the US Social Security Administration, women on average receive 22% less in Social Security benefits, driven in part by career pay gaps and part-time work.
Many financial advisors suggest saving enough to provide 70% of working income in retirement. Our study shows few do: 74% of women (65% of men) live on less than 70% of their working income. Yet only 31% of women (18% of men) report being dissatisfied with their income level.
Women are generally less optimistic about finances than men: 43% of working women report their savings are behind schedule (30% of men); while 37% of working men report savings ahead of schedule, considerably more than the 22% of working women who report the same.
“This highlights the deeply personal nature of financial goals, and the usefulness of periodically accessing calculators and tools to evaluate retirement readiness and enhance confidence,” said Mr. Ceder. “Planning assumptions should be evaluated along with each individual’s vision for retirement. A personalized retirement plan can offer distinct spending and retirement income strategies to help ensure that retirees achieve the desired level of financial security.”
Methodology
The supplemental report, Challenges Women Face Saving for Retirement, from the Retirement Survey & Insights Report 2023 by Goldman Sachs Asset Management, evaluates responses from working and retired Americans to understand the realities women face in preparing and living in retirement. Our goal is to identify financial obstacles women are encountering and the lessons individuals and plan sponsors can apply. We include key findings that we hope will help plan advisors and plan sponsors offer programs that better prepare women for a secure retirement.
Findings are from a July 2023 survey of 5,261 U.S. participants across generations (Baby Boomers, Generation X, Millennials, and Generation Z), including 3,673 working individuals and 1,588 retired individuals (age 50-75), with gender and generational breakdowns for both populations. The survey was conducted by Goldman Sachs Asset Management and Qualtrics Experience Management.
This report references prior research we did in collaboration with behavioral economists at Syntoniq, a behavioral finance technology company specializing in behavioral analysis that brings together decades of combined research experience in behavioral science, social psychology, and quantitative finance to turn psychological insights into measurable value.
About Goldman Sachs Asset Management
Bringing together traditional and alternative investments, Goldman Sachs Asset Management provides clients around the world with a dedicated partnership and focus on long-term performance. As the primary investing area within Goldman Sachs (NYSE: GS), we deliver investment and advisory services for some of the world’s leading institutions, financial advisors and individuals, drawing from our deeply connected global network and tailored expert insights, across every region and market – overseeing more than $2.8 trillion in assets under supervision worldwide as of December 31, 2023. Firmwide AUM includes assets managed by Goldman Sachs Asset Management and its investment advisory affiliates.