BRYN MAWR, PA – March 14, 2013 – According to new research recently completed by the State Farm® Center for Women and Financial Services at The American College, roughly six in ten women of color save for retirement in order to avoid becoming a burden to their children.
This concern was strongest among Asian women with more than two-thirds agreeing that it was important to avoid being a burden to the next generation; compared to 59 percent of African-American women who felt the same way. Of interest was the manner in which income levels correlated with this concern. Asian women with incomes that exceeded $75,000 were more likely than Asian women at lower income levels to prioritize saving for retirement for this reason.
“It is important to understand what motivates individuals to save for retirement,” said Sandra Carr, Assistant Director of the State Farm Center for Women and Financial Services at The American College. “Research like this can help financial services professionals better understand and address the concerns of their clients and by extension, help women prepare successfully for their “golden years.”
The Importance of Encouraging Women of Color to Save for Retirement
As part of a U.S. Department of Labor report entitled “Disparities for Women and Minorities in Retirement Savings,” Cindy Hounsell, President of the Women’s Institute for a Secure Retirement (WISER) confirmed that women work fewer years and earn less. Specifically, full-time working women earn about 78 cents for every dollar men earn – while African-American women earn 64 cents and Hispanic women 52 cents. In addition, women, on average, spend 12 years out of the workforce to provide care to their families. This absence denies women access to pay increase opportunities, increased Social Security benefits and retirement savings opportunities.
Preparing for retirement is further complicated by women’s lack of access to pension and retirement plans as well as increased longevity. According to Thomas Bartell, Chairman of Americans for Secure Retirement, a typical 65 year old woman has a 31 percent chance of living to age 90 or older, as compared to only 18 percent for a typical 65 year-old male.
Despite lower earnings, personal economic circumstances, access to retirement plans and longevity issues, women are finding ways to save. For example, “Millie’, is a 62 year old recent retiree from Miami who participated in the research conducted by the State Farm Center for Women and Financial Services at The American College. Millie’s son and his wife were both laid off. They moved back in with Millie and her husband, along with their new granddaughter. While Millie laments that employers’ do not really take care of their employees any more, she feels financially secure because she and her husband were able to save 20 percent of their income through their company 401(k) plans.
“Defined benefit company pension plans are disappearing. The long-term solvency of Social Security remains questionable. Personal savings must be encouraged if individuals are to achieve financial security in retirement,” said Sophia Duffy, JD, CPA, Assistant Professor of Employee Benefits at The American College.
The study conducted by the State Farm Center for Women and Financial Services at The American College found that only 42 percent of the survey participants say they save a certain amount each month. Workplace retirement plans are the most common way for women to save for retirement. Nearly nine in ten (89 percent) of the individuals surveyed who have access to a defined contribution plan, are currently contributing money to save for retirement.
This last finding does demonstrate that systematic savings plans can help individuals prepare for unexpected financial emergencies and make a positive impact on retirement preparation.
This survey was conducted online within the United States by Matthew Greenwald & Associates on behalf of the State Farm Center for Women and Financial Services at The American College between September 4 – 19, 2012. Information for this study was gathered through 17-minute online surveys with a total of 3,000 women including 750 interviews with women in each of three racial/ethnic groups, plus a comparison group that is representative of women in the general public. The women had to be between the ages of 25 to 75 and have a household income of $45,000 or more. The data are weighted by age and education to reflect the ppulation of women ages 25 to 75 with household income of at least $45,000. General population and minority women groups were weighted separately. If this study were a random survey of 750 women, it would have a margin of error (at the 95% confidence level) of plus or minus 3.7 percentage points. A full methodology is available. To see a copy of the full report visit womenscenter.theamericancollege.edu/financial-needs-of-women-of-color
About the Center:
The State Farm Center for Women and Financial Services is the first and only independent, academic center in the country devoted exclusively to studying women and financial services issues. The Center actively works to increase our understanding of women’s financially related expectations, attitudes and actions.
About The American College:
The American College of Financial Services is the nation’s largest non-profit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has served as a valued business partner to banks, brokerage firms, insurance companies and others since 1927. The American College’s faculty represents some of the financial services industry’s foremost thought leaders. For more information, visit TheAmericanCollege.edu
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