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Women demonstrate significant increase in understanding of employer-sponsored retirement benefits but still lag far behind men
SIMSBURY, Conn. (Profitable.com) With persistently high unemployment, a sluggish housing market and a slow-growth economy, the Great Recession has had a negative impact on many people’s finances. One unexpected bright spot has emerged, though, as more Americans say they are now focusing more on saving for retirement.
Consumers, especially women, are paying much greater attention to the savings within their employer-sponsored retirement plans, with nearly half saying retirement benefits are more important now than before the start of the recession, according to new research by The Hartford Financial Services Group, Inc. (NYSE: HIG).
The Hartford’s Retirement & Recession Study, conducted earlier this year, found a sharp, upward spike in the levels of understanding and participation in defined contribution retirement plans such as 401(k)s. Overall, 76 percent of respondents said they “completely” or “mostly” understood their retirement benefits in 2010 compared to 65 percent in 2009.
The biggest increase in the understanding of retirement benefits came from women, with 69 percent saying they completely or mostly understood their retirement benefits compared to 56 percent last year. Men’s understanding improved to 83 percent from 75 percent a year ago.
“Greater awareness of the importance of retirement savings is one of the few positive outcomes of the Great Recession,” said Sharon Ritchey, executive vice president and director of The Hartford’s Retirement Plans Group. “We’ve known for a long time that consumers need to save more for retirement and pay closer attention to their retirement savings. With economic issues staring us in the face every day, it appears that consumers are, at least for now, focusing more on preparing for retirement.
“It’s also welcome news that women are demonstrating greater understanding of the importance of retirement savings,” Ritchey said. “Unfortunately, fewer women say they have a solid grasp of their retirement plans than men.”
The Hartford’s study showed that consumers value their retirement plans more now than at the start of the Great Recession. Nearly half – 43 percent – said they now view their retirement plan as more important and 49 percent said they view it as just as important as before the economic crisis.
In another positive sign, consumers are more likely to participate in an employer-sponsored retirement plan today than they were a year ago. The percentage of those saving in a 401(k) or other defined contribution plan when offered by their employer rose to 84 percent in 2010 from 80 percent in 2009. Again, women showed the biggest jump, with 70 percent participating in 2010 compared to 61 percent in 2009. Men’s participation rate jumped to 71 percent, up five points from last year.
“The greater rate of participation in retirement plans, especially on behalf of women, is a real encouraging sign,” Ritchey said. “Compared to men, women have higher hurdles to reach a comfortable retirement. Women tend to earn less, be away from their jobs more often because of disabilities, pregnancies and family issues, and often invest less aggressively. On top of that, women tend to live longer than men and therefore need to rely on their retirement savings for more years.”
Ritchey said she encourages women to start saving for retirement as soon as possible and keep saving continuously throughout their working years. Women should find a financial advisor that they trust and work with him or her to create a long-term financial plan that includes a well-diversified retirement portfolio. The plan should include longer-term investments such as equities to help women not only reach retirement but live comfortably for many years thereafter, she said.
The Great Recession, although declared over by government economists, made it more difficult for many people to save and invest for retirement, according to The Hartford’s study.
One in five consumers (22 percent) said poor economic conditions forced them to reduce or eliminate contributions to their retirement plan. Women were twice as likely to have been affected (22 percent in 2010 vs. 11 percent in 2009) and men felt some pain as well (21 percent in 2010 vs. 15 percent in 2009).
Matching contributions from employers were reduced or eliminated for one in five consumers in 2010 (20 percent), an increase from 2009 (16 percent). Women saw a bigger impact year-over-year, with contributions being altered for 19 percent in 2010 compared with 14 percent in 2009. The impact on men was fairly stable with contributions changing for 21 percent in 2010 compared to 19 percent in 2009.
“When struggling with day-to-day economic issues, it can be difficult for many people to continue their focus on long-term financial issues such as retirement,” Ritchey said. “But many women may spend 20, 30 or even 40 years in retirement. It takes financial discipline and sometimes sacrifices to prepare financially, so stick to your retirement strategy no matter what the obstacles. Your quality of life in retirement will depend upon it.”
The Hartford’s study was conducted online this spring by Zeldis Research, polling 1,000 adults ages 18-65. The study had a margin of error of less than 3 percent.
About The Hartford
Celebrating 200 years of helping its customers achieve what’s ahead, The Hartford (NYSE: HIG) is an insurance and wealth management company. Through its unique focus on customer needs, the company serves businesses and consumers by providing the products and solutions they need to protect their assets and income from risks and manage their wealth and retirement needs. A Fortune 100 company, The Hartford is recognized widely for its service expertise and as one of the world’s most ethical companies. More information on the company and its financial performance is available at www.thehartford.com.
Some of the statements in this release may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include those discussed in our Quarterly Reports on Form 10-Q, our 2009 Annual Report on Form 10-K and the other filings we make with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued.