Wage Gap Worsens Over Time; Women’s Retirement Could Be Even More at Risk According to New Report on SMB Employees’ Retirement

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New data from Human Interest provides insights into how employees of small and midsize businesses are saving

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"Just like savings can compound, the wage gap can compound, too, into something much bigger – and in this case – more financially devastating by the time a woman reaches retirement."

Today, Human Interest, the affordable, full-service 401(k) provider for small and medium-sized businesses (SMBs) released data* that confirms the wage gap has implications for women that expand well beyond their time on the job.

Women’s Wage Gap Woes: Compounding into Retirement
In this second report in a series, data released by Human Interest shows that while men and women contribute to their 401(k) at similar rates—7.9 percent and 7.5 percent of income, respectively, this seemingly small difference can compound over the course of someone's life.

“It’s no secret that women earn less than men, with a woman, on average, making around 80 cents for every dollar a man makes,” said Jeff Schneble, CEO of Human Interest. “We hear all the time about how serious this 20-cent differential is, but we fail to put this difference in context: What does it mean over the course of a 40-year career? After 40 years of earning the average salary for their gender, a man would end up with a 401(k) balance that breaks down into a $2,200 payout every month for the rest of his life whereas a woman would have 30 percent less—only $1,500 a month. Just like savings can compound, the wage gap can compound, too, into something much bigger – and in this case – more financially devastating by the time a woman reaches retirement.”

The Math: The Difference 0.4 Percent Can Make Over Time
Take two 25-year-olds, a man and a woman. Say each earns the average salary for their gender, and contributes 7.9 percent and 7.5 percent to their respective 401(k). If that 401(k) gets 5 percent returns over the course of 40 years, the man and woman will reach retirement age with a difference of more than $100,000 in the size of their savings.

More Key Findings: How SMB Employees Save for Retirement
Data shows that SMB employees across the board will invest when given access to a vehicle to help them save for retirement. Across demographics and industries, people contribute between 5-10 percent of their salary when they have access to a workplace 401(k).

Married People Save More with Married Women Leading the Charge
Compared to people who are single or divorced, married people contribute the highest percentage of their income to their 401(k):

  • On average, married people are allocating 8.2 percent of their income to their 401(k). Those who are single contribute slightly more than those who are divorced, (7 percent and 6.8 percent, respectively).
  • In general, men are contributing a higher portion of their income to their 401(k) than women. However, the one exception is married women: Married women are saving more in their 401(k), at 9.0 percent vs. just 8.2 percent for men. This data suggests that married women working at SMBs and contributing to their company 401(k) will have less of a shortfall in retirement.

“For years, women have been at increased risk of financial insecurity in retirement. Our data shows that married women, specifically, are now out-saving men. By allocating more funds to their retirement plans, they’re shoring up their financial future,” said Schneble.

No Employer Match? Not a Dealbreaker
While offering an employee match can drive plan participation, an employer gives employees a strong vehicle for retirement savings by simply providing a 401(k):

  • On average, with a match, employees contribute 7.4 percent per year; without one, they contribute 7.1 percent.

All Income Levels Save
Data highlights that when given access to a retirement plan, employees – even those with lower salaries – are committed to setting themselves up for a financially secure future:

  • People earning a $30,000-$39,999 salary are saving 6.1 percent of their salary in their company 401(k).
  • Workers earning $200,000-$209,999 are saving 7.7 percent of their salary in a 401(k).

This data was created by analyzing the savings patterns of more than 28,000 anonymous SMB employees saving for retirement through the Human Interest 401(k) plan offered by their employer. The participation rates were calculated by comparing the number of employees eligible to participate in an employer-sponsored Human Interest 401(k) with the number currently participating. Contribution rates were calculated by averaging each individual’s contribution rate throughout the lifetime of the plan. These rates were analyzed by age group, gender, marital status, salary, industry, region, and employer match availability; sample sizes vary by group. The data was compiled and analyzed by Human Interest, and is the second part of a series of reports about the retirement preparedness of SMB employees in America.

Sources: Human Interest proprietary data; average wages: Bureau of Labor Statistics; average life expectancy: Social Security Administration

About Human Interest
Human Interest is the affordable, full-service retirement benefit provider for small and medium-sized businesses. With a Human Interest 401(k) or 403(b), employees in all lines of work can access a high-quality retirement savings plan to help them on the way to financial independence. Headquartered in San Francisco, CA, Human Interest has helped more than 60,000 employees working at 2,000+ small and medium businesses across America. For more information please visit humaninterest.com or follow us on LinkedIn.

Investment advising services are provided by Human Interest Advisors LLC, an SEC-Registered Investment Advisor. This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Human Interest Advisors is not registered. An investor should consider investment objectives, risks and expenses before investing. There are risks involved with investing. Investors should consider all of their assets, income and investments. All opinions and results included in this publication constitute Human Interest Advisors' judgment as of the date of this publication and are subject to change without notice.

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