Vestwell’s mission is to close the savings gap, but there’s more than one savings gap in need of closing.
The gender retirement gap is still with us today; recent history shows us why. Only in 1963, with the passage of the Equal Pay Act, did the principle of “equal pay for equal work” become law. It would be another 11 years until the passage of the Equal Credit Opportunity Act of 1974, which gave women the right to obtain a credit card. The Pregnancy Discrimination Act would come another four years after that, and it wasn’t until 1981 that the Equal Employment Opportunity Commission produced guidelines defining sexual harassment as a violation of the Civil Rights Act of 1964.
Over this period of change, progress has undoubtedly been made. In 1973, full-time working women earned a median of 56.6 cents for every dollar their male counterparts earned, compared to 83 cents today. However, our industry, in partnership with governments, advisors, and small business owners, has the ability to further close the gap we see today. By working to expand access to savings for all people, we can build a world where the gender retirement gap is left in the dustpan of history.
The theme of this year’s International Women’s Day (IWD) is #EmbraceEquity. According to the IWD website, “The aim of the #EmbraceEquity campaign is to get the world talking about why equal opportunities aren't enough. People start from different places, so true inclusion and belonging require equitable action.” Following in these footsteps, Vestwell is launching our own #EmbraceEquityInSavings campaign, where we ask our community to join us in closing the gender savings gap.
Our employee resource group, Women at Vestwell Elevated (WAVE), has launched several initiatives to empower women at Vestwell during the month of March and throughout the year. In partnership with the organization We Inspire. Promote. Network. (WIPN), we are hosting a panel conversation with members of Vestwell’s Board of Directors at Vestwell’s headquarters. This discussion will focus on the changes that need to be made in the industry to help women save more and address the inherent challenges to saving for retirement.
We believe embracing equity in savings is an important call to action because it speaks to the heart of the gender retirement gap we see today. In our 2023 Retirement Trends Report, Vestwell examined the saving behaviors of men and women. From Oct. 2021 through Sept. 2022, the average contribution rate for women remained unchanged at 7.5%. Men’s saving behavior was similar: from Oct. 2021 through Sept. 2022, the average contribution rate remained 6.8%. Overall, our data noted minimal differences between the savings behaviors of men and women on our platform, though women did on average contribute at higher rates than men.
Indeed, the gender retirement gap does not necessarily come from differences in saving rates. Rather, differences in the types of jobs held by men and women, rates of part-time work, time in the workforce, and more, may better explain the gap we see today. This demonstrates the importance of embracing equity in savings, rather than mere equality. Women do save at the same or higher rates than men, so why does the gender retirement gap persist?
As is the case with many social inequalities, the causes of the gender retirement gap are multi-faceted. For one, millions of women who are still alive today were adults before the passage of the Equal Credit Opportunity Act and other anti-gender discrimination laws. The explicit, legal discrimination they faced as younger adults has naturally impacted them throughout their life.
However, other factors resulting in women saving less for retirement persist today despite the ban on outright discrimination. Just some of these include:
On average, women earn 83 cents for every dollar earned by men. Because retirement saving is a function of how much one earns, as much as how much one saves, women are, on average, less able to accrue high retirement savings than men. This disparity is even greater for women of color, with Black women earning just 60 cents and Hispanic women earning 55 cents for every dollar earned by white, non-Hispanic men.
According to the National Women’s Law Center, women are 1.6 times more likely to work part-time than men. Part-time workers often have less access to savings benefits than their full-time counterparts, with the Transamerica Retirement Survey finding that 80% of full-time workers were offered a 401(k) compared to 51% of part-time workers. Additionally, many people who work part-time choose to do so in order to fulfill other responsibilities. Accordingly, the National Women’s Law Center also found that the vast majority (80.4%) of parents who work part-time are women.
Retirement saving is a cumulative process: more time in the workforce means more contributions to a 401(k), more years earned toward a pension, and more total income put into savings. According to the Bureau of Labor Statistics, women work almost 10% fewer hours than men do. In addition to women being more likely to work part-time, this disparity can be attributed to women having to accommodate for caregiving and other unpaid obligations.
According to a 2021 report from the Centers for Disease Control and Prevention, a 65-year-old woman can expect to live an additional 20.4 years, while a 65-year-old man can expect to live only 17.8 more years. As a result, women need to prepare an additional 2.6 years worth of retirement savings compared to men.
Unfortunately, these additional years can be some of life’s most expensive. According to a 2022 study conducted by the Employee Benefits Research Institute, for retirees to achieve a 50% chance of having enough money to cover premiums and median prescription drug expenses, a 65-year-old man needs $79,000 in savings, and a 65-year-old woman needs $103,000. This represents a 24% increase in the savings a woman will need over a man in the final years of their life.
Through Vestwell’s work with small business owners, advisors, and governments, we are helping to tackle some of these factors head-on.
Core to our mission is ensuring that everyone, no matter their circumstances, has access to a retirement plan. To that end, Vestwell has partnered with states like Colorado and Oregon to administer their state auto-IRA programs. Programs like these can allow part-time workers who may not have access to a 401(k) to save for a dignified retirement. They also help set a “floor” for the retirement options employees have access to, encouraging employers to implement their own, more generous retirement plans.
Additionally, according to Vestwell partner Gusto, just 22% of small and medium-sized businesses offer retirement benefits, compared to 65% for larger organizations. Many industries that have a high mix of small businesses are disproportionately likely to employ women. Some examples include home healthcare services (made up of 84.6% women) and child daycare services (95.6%). For this reason, we also work with small businesses to provide affordable, best-in-class retirement plans and administrative services. In combination with the tax credits included in the SECURE 2.0 legislation, Vestwell is doing our part to ensure no workers are left without an option for retirement savings.
Though Vestwell cannot remediate all of the causes of the gender retirement gap alone, we will do everything in our power to ensure that what we have the power to change gets changed. As part of our #EmbraceEquityInSavings campaign, we invite our industry peers, partners, and clients to take up the same mantle. We invite them to commit to the hard work of expanding access to savings opportunities and to embrace equity in their own workplaces. As long as a savings gap—of any kind—remains, our mission to democratize access to savings for all will continue in stride.