Women Showing Greater Commitment To Retirement Savings

Women have long trailed men when it comes to retirement savings but new data from MassMutual Retirement Services shows that women are responding to the challenge and are closing the gap.

Data from marketing campaigns and employer-sponsored retirement plans shows that women are responding more favorably than men to initiatives encouraging retirement saving, especially women aged 18-34, MassMutual reports. Retirement saving rates among women are also catching up to those of men, but women's average salary deferral or savings rates still lag behind those of their male counterparts.

"The longer-term trends show women are taking retirement savings more seriously and in some instances are now eclipsing men," said Elaine Sarsynski, Executive Vice President, MassMutual Retirement Services. "MassMutual is seeing increases in the rates that women respond to campaigns to boost their retirement savings. We're now finding that women's retirement savings account balances in defined contribution plans such as 401(k)s are climbing faster than men's."

MassMutual provides services for approximately 37,000 retirement plans with 2.8 million participants and a total of $148 billion in assets under management as of June 30, 2014.

MassMutual, in analyzing its data on retirement plan participants, found that the average retirement savings balance for women was up 17 percent from a year ago and 71 percent from 2009. The gap between the average balance between women and men narrowed to 37.8 percent in the second quarter from 40.5 percent in 2010.

Earlier this year, a campaign sponsored by MassMutual to encourage retirement plan participants to increase their deferral or savings rates yielded higher response rates for women than men. Younger women aged 18-34 led all retirement savers who increased their deferral rates. Women in this category increased their response rates by 38 percent from 2013 and 55 percent from 2012. Women aged 35-54 also showed more interest in retirement savings, with response rates rising by 42 percent from the same time last year.

MassMutual is seeing greater interest in retirement savings on the part of women overall and younger women in particular because the firm has been able to more tightly segment specific target markets and appeal to narrower demographic groups on their terms, according to Sarsynski. Retirement-saving messages, graphics, images and photos and delivery vehicles are being tailored to fit market segments to better connect with retirement plan participants, she explained.

While those marketing efforts are gaining traction, the average salary deferral rate for women continues to trail men, 5.37 percent to 5.70 percent of compensation, respectively. However, the deferral rates for women have remained fairly steady since 2010 while the rates for men have declined.

There are differences in deferral rates not only by gender but by industry and geography:

The states with the top three average salary deferral percentages among women were:

Montana (8.56 percent), Michigan (8.02 percent) and Rhode Island (7.53 percent); the lowest three states for women were West Virginia (4.49 percent), Mississippi (4.77 percent) and New Mexico (4.98 percent).

The states with the top three average salary deferral percentages among men were:
Montana (8.18 percent), Hawaii (8.13 percent) and Delaware (7.73 percent); the lowest three states for men were Arkansas (5.35 percent), Mississippi (5.43 percent) and Utah (5.55 percent).

The industries with the top three average salary deferral percentages among women were healthcare and social assistance; manufacturing; and finance and insurance.

The industries with the top three average salary deferral percentages among men were manufacturing; professional, scientific and technical services; and finance and insurance.

"There are real differences between how men and women think about retirement savings and respond to messages that encourage retirement savings," Sarsynski said. "MassMutual continues to learn more about those differences and is increasingly focusing on specific demographic trends to better tailor our retirement education, marketing and messaging to help our three million participants retire on their own terms."

Time management thoughts

1. Don’t waste time waiting. If you find yourself waiting for things to get done, bring work along with you, or even a good book that you have been wanting to read. Getting an oil change? Bring something to work on.
2. Get a planner. There are many types of planners out there today, some of the better ones out line each day of the week in 15 minute intervals, as well as included a full page monthly calendar. Once you find one you like, use it.
3. Differentiate between urgent and vital. Urgent are things that are due soon, but may not be life or death. Vital are things that may or may not be urgent, but that you absolutely must do.
4. Schedule your priorities do not prioritize your schedule. Take charge of what you have before you. You have the power to decided what you do and when.
5. Time journal for two weeks, giving account for every 15 or 30 minutes of time. This will help you see where your time is going and what takes up most of your time.
6. Learn to say no. This is your greatest ally. Practice saying no in polite but firm ways. You are no one’s door mat. Decide what you are going to do, then do not get distracted by other tasks that people may want you to do for them.
7. Learn what drives procrastination. Examine that times that you find yourself procrastinating. Is it because of the task, the time of day, or your overall mood?
8. Figure out what your time is worth. If you make 60,000 a year, each hour is worth roughly $7.00 (including waking and sleeping hours). Now, decide what tasks are worth your pay and don’t sweat the small stuff.
9. Set clear goals. Having a clear direction will help keep you on task. For everyone item on your to do list, think through each step that needs to get done to complete that task.
10. Put things into perspective. Take a moment each day to take a larger picture look. This can be considering yourself in relation to your life goals, or to humanity in general.

Is Pension Reform in the cards for Canada if current government defeated?

On October 19, 2015 Canadians will be going to the polls to elect a Federal Government. One of the concerns for Boomers should be the issue of Pensions.

The ruling Conservatives continue to mismanage one of the most pressing economic issues  facing Canada today “Canadians and provincial governments understand the urgent need for action from the federal government to address the looming retirement security crisis,” said NDP Pensions critic Murray Rankin (Victoria). “While The Conservatives keep blocking progress to boost the CPP/QPP, Canadians are growing increasingly concerned about their retirement security.”

A new EKOS survey found that 69 per cent of Canadians believe the federal government should take a leading role to ensure Canadians can retire – either through savings programs or income supports. 

Fully half of Canadians surveyed said they were concerned they wouldn’t have enough money for their retirement. Unfortunately Conservatives have blocked all efforts to boost retirement savings and increase the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) benefits.

“While the Premiers meet to discuss this pending crisis, Conservatives are actually making matters worse by blocking increases to public pensions and eroding access to good quality company pensions,” said Rank

So if the current government returns to power, then the pension situation for seniors and younger boomers  will get worse, not better but the only change the other two parties are committed to is to roll back the age where Canadians can collect Old Age Security and the Canada Pension (if eligible and without penalty) to 65. There is a rumor out there in my circle that one of the opposition parties will also remove pension splitting for seniors.  So the future of pension reform in Canada under any political party elected in the next election is not looking good.

As we move into the election cycle in Canada remember the old joke (truth) How can you tell if a politician is lying? Answer: They are talking.

Canadian Perceptions of Pension Reform

A recent Ekos survey  Canadian Perceptions of Pension Reform and Retirement Security finds that only 15 per cent of Canadians are “very confident” they will have enough money to retire “comfortably” compared with 29 per cent who are “somewhat concerned” and 21 per cent who are “very concerned. 

In addition, 69 per cent of Canadians believe the federal government should take the lead in ensuring “Canadians can retire – either through savings programs or income supports.”

One of the reasons is that most Canadian workers do not have a workplace pension plan. Coverage under these plans has dropped from 45% of employees in 1992 to just 38.8% in 2010. The reality is that 11 million Canadian workers don’t have a workplace pension plan.
To make matters worse, most Canadians are not making up for their lack of a pension plan by saving for retirement on their own. In 2009, only 31% of those eligible to contribute to an RRSP actually did so. This number dropped significantly in 2010 to just 26%. Statistics Canada reported recently that just 24% of tax filers made an RRSP contribution in the 2012 tax year. 

Among people about to retire — i.e., those age 55 to 64 — the typical person with an Registered Retirement Savings Plan has saved about $55,000. That’s enough to provide a monthly income of about $250. 

The survey notes that “Canadians view pension enhancements as an investment not harmful to the economy.This contrasts with Ottawa’s position – last December, the provincial finance ministers met with then-federal finance minister Jim Flaherty. Pension reform was discussed but was dismissed by Mr. Flaherty. The federal government’s position was that the economy was still weak and it wasn’t the time to increase CPP contributions.

According to the survey, 63 per cent of Canadians believe that “increasing premiums is an investment in achieving a more secure retirement …” It also found 55 per cent of respondents want provinces and territories to “pursue their own supplementary pension plans in the absence of federal leadership on the CPP.”

The Canadian Institute of Actuaries says “only about one-third of Canadian households are currently saving at levels that will generate sufficient income to cover their non-discretionary expenses in retirement.” Public pension plans available to everyone — Old Age Security (OAS) and the Canada Pension Plan — don’t provide enough for people to live on in retirement. The expectation is that people will supplement the benefits available from these plans with membership in a workplace pension plan or with their own savings. Clearly that has not happened. That one statistic that only 24% of us invest in our retirement settles the debate and suggests we redouble our efforts to find remedies

The average RRSP contribution that was made in 2012 was almost exactly $6,000 ($5,999 according to Statistics Canada). Not bad, you might say, but not enough to provide real retirement security. Before coming to that conclusion, consider the following three facts.

• First, of the nearly six million Canadians who contributed to an RRSP in 2012, more than two million also participated in a pension plan. Their RRSP contributions would have been lower, so the remaining RRSP contributors must have put in more than $6,000, on average.
• Second, millions of RRSP contributors also put money into a TFSA. As of 2011, 8.2 million Canadians had a TFSA and based on the year-by-year growth in the number of accounts, there are probably more than 10 million people that now have TFSAs.
• Finally, the average Canadian wage is just over $50,000, so setting aside $6,000 (or more) for retirement is quite a substantial sum.

Is all this to say we shouldn't be expanding the CPP or creating pooled registered pension plans or taking other steps to improve the general state of preparation for retirement? Of course not. The retirement income system is a work in progress, and we need to continue improving it. 

Why women should think differently about retirement planning

This article appeared in the October 2014 issue of Consumer Reports magazine and I thought it worth sharing.

A healthy man of 65 has a 40 percent likelihood of living to age 85, the Society of Actuaries reports, but for a 65-year-old woman, the odds are better than even. Women live longer, so they need their money to last.Yet social and economic forces—lower average wages, positions less likely to offer pensions or retirement savings options, interrupted careers for child and parent care, and higher medical spending—contribute to a bleaker retirement outlook for women. Their income in retirement is about half that of men, according to the AARP.

What all women can do

A recent survey of Consumer Reports readers found that the more a woman contributes to the household’s overall income, the greater say she has about concerns related to retirement. But breadwinner or not, any woman can improve her confidence about money matters and, quite possibly, her chances of living securely in later years. Our suggestions:

• Educate yourself about investing. “The Little Book of Commonsense Investing,” by John C. Bogle (John Wiley & Sons, 2007), is a useful primer by the founder of the investment giant Vanguard. On Bogleheads.org, a community of Bogle’s followers share insights and advice on a variety of financial topics. Women's Institute for a Secure Retirement, financed by public and private grants and individual donations, offers simple explanations of investment concepts, such as dollar-cost averaging and mutual-fund expenses. The Securities and Exchange Commission’s topic pages provide more information.
• Don’t avoid risk. Stocks, which carry greater risk and potential for growth, can help savings grow before retirement. In retirement, they can protect a nest egg against inflation. You can reduce unnecessary risk by diversifying your holdings with broad-based stock (equity) index funds. Consider having at least 40 percent of your portfolio at retirement in stock funds. Put the rest into bonds, with a small ­percentage in cash. (If you’re expecting a significant pension, you may be able to hold more in stocks.)
• Count on a reverse mortgage last. None of our 22,000 readers reported using this arrangement, which lets homeowners draw from the equity in their homes and stay put for their lifetime. Among the negatives: potentially high up-front fees and the possibility later in life that you won’t be able to keep up with home maintenance, taxes, insurance and other loan requirements. Our advice is to investigate other options first, such as family financing, and to wait as long as possible to borrow. Ask a certified financial planner or other professional to determine whether you can pay required expenses.

What married women can do

• Share financial duties and information. As many a divorced woman or widow knows, depending on a husband to handle all of the finances can backfire once he’s no longer in the picture. Make a point of talking with your spouse about day-to-day and long-term finances. Three things to know or have access to: important papers such as wills and car titles; numbers and passwords for all financial accounts; and names and contact information of financial advisers, attorneys, accountants, and insurance companies or agents.
• Have your own retirement savings. Even stay-at-home moms can open and contribute to a Roth or traditional IRA as long as they or their spouses earn taxable wages equal to or exceeding those contributions. The maximum annual contribution for 2014 is $5,500 ($6,500 for those 50 and older).
• Keep beneficiary information up to date. If a husband has forgotten to remove an ex-wife as beneficiary for certain assets such as his life insurance, the money could legally go to her, not to his widow, depending on state law, how the insurance contract is written, and whether it’s an employee benefit.
• Be aware of options for Social Security. A married or divorced woman may receive more in retirement benefits by claiming a spousal benefit—worth half of her current or ex-husband’s Social Security earnings—than by claiming a benefit based on her own work history. If she claims the spousal benefit, she has the option to later claim her own benefit, allowing it to grow in the interim. 

What single women can do

• Research communal living arrangements. A growing number of single people older than 50 are living with relatives, friends, and acquaintances in a house or an apartment. One person might own the home and rent to others, or a group might buy or rent together. Participants get companionship and safety, and often lower ­living costs. To find out whether the option might work for you, check out Women for Living in Community and the National Shared Housing Research Center. 
• Tap community resources. Take advantage of senior resources offered through nonprofits, houses of worship, and county departments on aging. Connecting to those options can be even more important when you live alone. Some communities are setting up  “villages,” or supportive networks, for people who don’t want to move after they retire. Members who pay dues to Capitol Hill Village in Washington, D.C., for instance, get access to car rides, computer troubleshooting, light housekeeping, social events, exercise classes, lectures, and trips. They also get help when there’s a medical crisis, care after a hospitalization, and social services. Volunteers staff the organization. (To find  “villages,” go to the Village to Village Network.)