How the Gender Gap Impacts Retirement

A look at how historic barriers can affect retirement preparedness for women

Many women face various hurdles that ABOUT OUR APPROACH impede their ability to create a financially At Fidelity, we think broadly secure retirement, as we previously explored about how to support and in the financial reality of being a woman and promote diverse the tough decision many deal with when perspectives at our firm and considering leaving their . also across the financial services industry and Here, we explore historic and current factors beyond. We’re committed to that threaten financial for many listening and exploring within women while highlighting opportunities we this space, and to sharing the see in our Fidelity research and insights to best practices we’ve learned help close the financial wellness gap. along the way.

Average of total and earnings by gender1 Fact: $43,703 There is a gap between men and women’s pay for doing the same or similar . That $27,165 gap grows amongst different racial and ethnic groups. Less income means less money to save.

All Women All Men

Earning power across gender and race1 Many Black and Latina mothers are their 's White Men $1.11 primary earner, making the struggle even greater to $1 $1 earn and save.2 All Men $1 $1.00 $1 $1 Share of all mothers who are primary earner by race and ethnicity, 20172 Asian Women $0.81

White Women $0.66 White 36.8% Native Hawaiian & $0.63 Pacifici Islander Women Black 68.3% All Women $0.62 Hispanic/Latina 41.0% Black Women $0.58 Other race/ 31.9% Hispanic/Latina Women $0.45 ethnicity

Native American & $0.44 Alaska Native Women

Fact: On average, caregiving affects when and how women have a . 4 in 10 working women are actively considering leaving the workforce or reducing their hours due to increased remote schooling, caregiving responsibilities, and other unpaid labor.3

Women are more likely to be caregivers Impact of a career 4 for their spouses and parents Estimated retirement at age 67 for a woman Women considering a at age 35, based on Men $50k salary. Takes 12 months off $839,594 Parental Caregiver Spousal Caregiver No career break $733,125 37% 44% 56% 63%

Over 50% Taking 12 month of caregivers have reported career break could arriving late, leaving early, or to taking time off during the day to mean a difference of provide care.4 $106,469 savings!5

Percent distribution of workers 6 Fact: employed full and part-time by sex Women On average, women are more likely to be Men employed in careers that don’t offer retirement Full-time 43% 57% 6 benefits or workplace savings plans. Part-time 64% 36%

Women were harder hit by the Pandemic—putting mothers at risk of leaving the labor force and reducing work hours in order to assume caretaking responsibilities amounts to 2 $64.5 billion per year in lost and economic activity.7

Fact: Average retirement timeline8 On average, women women: 631 women: 80.98 spend more time in retirement—by 60 65 70 75 80 retiring earlier and Retirement age Life expectancy living longer. men: 651 men: 76.68

The median income of older persons in 2017 was $32,654 for males and $19,180 for females.9

ME The average age for women to retire with the same lifetime WI VT NH earnings as a 65-year old male counterpart by state10 WA ID MT ND MN IL MI NY MA

65-69 OR NV SDWY INIA OH PA NJ RICT 70-74 75-79 UTCA CO NE MO KY WV VA MD DE 80-84 85-89 AZ NM KS AR TN NC DCSC

AK LAOK MS GAAL

HI TX FL

The average age for women to retire with the same lifetime Native Hawaiian & Pacific Islander earnings as a 65-year old male women: 79 10 counterpart by race and ethnicity Asian White Hispanic/Latina women: 71 women: 77 Women: 86

60 65 70 75 80 85

White Black Native American & men: 63 women: 79 Alaska Native All men: 65 women: 87 All women: 78

The landscape is changing Over the last decade, the number of women in the workforce has increased tremendously, leading to greater access to employer sponsored savings vehicles. Women’s -term savings has continued to increase year over year, leading to higher retirement balances. $297,900 Average retirement plan balance for women continuously invested for 10 years11 (as of Q4 in the year noted) $136,800

$61,800 5.2% 5.1% 4.9% 4.8% 4.5% 4.7% Average 4.1% 4.3% 3.8% 3.9% employee and 3.5% employer

contributions for 10.3% 9.1% 9.5% 9.9% 8.0% 8.4% 8.7% women who are 7.0% 7.3% 7.5% 7.7% continuously invested for 10 years11 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Employee Contributions Employer Contributions

An increase of nearly 80% in women’s average retirement plan account balances over the last 10 years is in part due to their commitment to save.11

Despite numerous obstacles, a Percent of women who expect their financial 12 Fidelity study found that all situation to improve in the next 10 years

demographics, especially Black 74% women, display positive 66% 63% 58% expectations for their future 52% financial situations, a testament to the resiliency and hope that women have long exhibited.

Women Hispanic/ Black Asian/Other White overall Latina

However, there are actions we recommend employers take to help close the gap.

ENSURE EQUITABLE COMPENSATION

Design pay and performance programs to be delivered equitably.

FOCUS ON BUILDING FINANCIAL CONFIDENCE AND KNOWLEDGE

More confident financial decision makers are more engaged with , products and services that help them make the best choices to meet their needs. Only 44% of women who rate their financial knowledge as above average or expert.14

REVIEW BENEFIT PLAN DESIGN

A well-designed workplace savings plan is often the most eective tool to building retirement security for all employees. Approximately 1 in 4 employers review the performance of their plan design quarterly.15

MAKE EDUCATIONAL OUTREACH A PRIORITY

Helping employees understand how they can reach their retirement goals is impactful. 7 in 10 employees say access to help with savings goals is very important.16

For more information on ways to take action and resources available, please contact your Fidelity Representative.

For plan sponsor use. 1 Calculations done using 1987 – 2020 Annual Social and Economic Supplements, Current Population Survey, U.S. Census Bureau. 2 Glynn, Sarah Jane. “Breadwinning Mothers Continue To Be the U.S. Norm.” Center for American Progress, 10 May 2019. 3 Fidelity Investments Pandemic Impact Study, September 2020. 4 Report to the Special Committee on Aging, U.S. Senate (May 2019). Caregiving and Retirement Security (GAO-19-382). U.S. Government Accountability Office. 5 This hypothetical example shows estimated ending retirement plan balances for a woman who at age 35 is earning $50,000, $75,000 or $100,000 in salary. The estimates assume a 9% employee contribution rate to a workplace retirement account, with an additional 3% employer match, and a 1.22% annual real salary growth rate. Example assumes an 18% reduction in salary when returning after the one-year career break. Contributions are made at the beginning of every year and a 4.5% real rate of return is applied every year until age 67. The ending values do not reflect , fees, or inflation. If they did, amounts would be lower. Earnings and pre- contributions are subject to taxes when withdrawn. Distributions before age 59½ may also be subject to a 10% penalty. Contribution amounts are subject to IRS and Plan limits. Systematic investing does not ensure a profit or guarantee against a loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for 4.5% annual rate of return also come with the risk of loss. 6 2016 Current Population Survey, U.S. Bureau of Labor Statistics. 7 Landivar, L. C., Ruppanner, L., Scarborough, W. J., & Collins, C. (2020). Early Signs Indicate That COVID-19 Is Exacerbating Gender Inequality in the Labor Force. Socius. https://doi.org/10.1177/2378023120947997. 8 Life Tables for the United States Social Security Area 1900-2100. 9 Administration on Community Living/Administration on Aging (April 2018). 2018 Profile on Older Americans (“Older Americans” refers to the population age 65 and over), U.S. Department of Health and Human Services. 10 CPS Annual Social and Economic (March 2020) Supplement. 11 Based on Fidelity analysis of 23,300 corporate DC plans (including advisor-sold DC) and 19.0 million participants as of 12/31/2020. 12 Fidelity Investments Inclusive Needs & Engagement online surveys among 3,596 participants who participate in either a 401(k) or 403(b) plan with their current employer. The survey was conducted by CMI Research, an independent third-party research firm, on behalf of Fidelity in September 2020. 13 Belogolovsky, Elena, and Peter A. Bamberger. “Signaling in Secret: Pay for Performance and the Incentive and Sorting Effects of Pay Secrecy.” Academy of Management Journal, vol. 57, no. 6, 2014, pp. 1706–1733., doi:10.5465/amj.2012.0937. 14 Fidelity Investments Inclusive Needs & Engagement online surveys among 3,596 participants who participate in either a 401(k) or 403(b) plan with their current employer. The survey was conducted by CMI Research, an independent third-party research firm, on behalf of Fidelity in September 2020. 15 Fidelity Investments 2020 Plan Sponsor Attitudes Survey. 16 Fidelity Investments Help and Advice survey, April 2017. Data collection was completed by CMI Research. Fidelity Investments was not identified as the survey sponsor. CMI Research is an independent research firm not affiliated with Fidelity Investments. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917 © 2021 FMR LLC. All rights reserved. 968179.1.0