NEW YORK (MainStreet) Living longer but saving less will put retirement plans at risk. And that's a dilemma women are facing. A new study by Aon Hewitt says that women save less for retirement than men -- and combined with longer life expectancies, that's putting their financial wellbeing at retirement in jeopardy. But there are take active steps they can take to put their after-work life plans back on track.
According to an analysis of more than 140 401(k) plans representing 3.5 million eligible employees, women are participating in their employers' defined contribution plans at the same rates as men, but they save less -- an average of 6.9% of pay, compared to 7.6% for men. In addition, nearly a third (31%) of women contribute below the company match threshold, compared to just a quarter of men. And that contributes to the fact that women have 401(k) balances that are significantly less than men. While the average plan balance for women is $59,300, it's $100,000 for men. The finding is consistent across all salary ranges.
"Women face a number of challenges when it comes to saving for retirement, including gaps in their career when they are not actively contributing to their retirement and longer life expectancies," says Patti Balthazor Björk, director of Retirement Research at Aon Hewitt. "However, there are factors that women can control to boost their retirement savings, such as how much they contribute, how they invest over time and whether they keep assets within the retirement system."
Women also see their retirement prospects penalized by defaulting on 401(k) loans. The study shows that even though both sexes take loans from their retirement savings at similar rates, when leaving a job women are more likely than men to default on a loan. Nearly three-quarters of women (71%) who terminated employment while carrying a 401(k) loan failed to repay it, compared to 64% of men.