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The Retirement Savings Crisis "Aha"...and Why It Really Matters

The Retirement Savings Crisis "Aha"...and Why It Really Matters

By Sallie Krawcheck

This article originally appears on Linkedin.

Here's what we know: we know that the retirement savings crisis is enormous; by some estimates, Americans are under-saved by up to $14 trillion. We know that this number, as large as it, may in fact be understated, because it assumes Social Security and Medicare solvency…..a big if. We know the solutions to this problem are generally assumed to be a real negative for the economy. As a result, the challenge is so significant and the possible solutions so unpalatable that we are frozen on this problem.

But here’s the dot that few have connected: the retirement savings crisis is also a woman’s crisis.

That’s because women retire with 2/3s the savings of men, live six to eight years longer and have higher medical costs. 80% of women are single in their final years. And it may actually be getting worse: because retirement savings tend to be driven by lifetime wages, we may be moving in the wrong direction, as women’s labor force participation declines.

By looking at this issue through this additional gender lens, the possible solutions take on a decidedly different character.

They become less about an inevitable, looming wealth transfer and much more about increasing the economic engagement of women. At the same time, the national discussions we’ve been having about advancing women in the workplace shift as well; they move from we-should-do-this-because-it’s-the-fair-thing-to-do to we-should-do-this-because-it-helps-solve-a-ridiculously-large-problem.

Unfortunately, there does not then follow a single “soundbite,” pop-culture answer; it’s certainly not as simple as telling women to try harder or to “fix” them so that they act more like men.

Instead it’s about making the investment in shifting the workplace as we know it to a more inclusive, more modern one. It is thus less about changing the women and much more about changing the workplace.

A good place to start is by fully valuing the work of women by closing the gender pay gap (which is, after all, the law of the land); this would in turn close the Social Security savings gap by a third, according to Social Security Works. That’s because those higher earnings would in turn fund retirement plans and pay into Social Security.

A second avenue is instituting longer company-paid parental leaves. Many companies, including Google, have found that longer maternity leaves mean more mothers return to work after having children. Given that replacing a worker can cost from 150% - 200% of their salary, this can be a smart investment for the company. And again, over time, this drives higher retirement savings for the parent.

The same logic can hold at the public policy level. Indeed, were the United States to leave the ranks of Papua New Guinea as one of the few countries in the world without a government-mandated paid maternity leave, this would not just benefit those women pesky enough to have children; we would be investing in shoring up Social Security, enabling more people to pay into the system.

These actions will pay off in other ways as well. By some estimates, if women were fully engaged in the US economy, GDP would grow by up to 9%. That’s good for everyone. And multiple research studies show that companies with diverse leadership teams themselves benefit, outperforming others on an array of metrics, including higher returns on capital, lower risk and greater innovation.

In fact – and, to some, perhaps counter-intuitively – companies that adopt family-friendly policies are met with a positive reaction in the stock market, as it presumably forecasts positive returns from such policies and the more engaged workforces that result.

I recognize that it can be tough to make progress on diversity. I’ve seen this first hand. I recall one company at which I worked closing a worksite’s daycare center – and making the decision without analyzing the impact on employee absenteeism or turnover (which was significant). I remember the company having in place flexible work programs; but employees were nervous about accessing them, for fear that they would be viewed as less committed to their jobs than those who were putting in long hours of “facetime,” particularly in the aftermath of the financial crisis.

And while it’s been years since I witnessed overt discrimination, I often saw the subtle biases that “we need someone we can really trust in this important job” – and that someone was typically the mirror-image of the executive making the decision – “but next time we’ll be sure to put in a woman, or a person of color, or someone else who doesn’t look just like us.” But those individual decisions were allowed to win the day, again and again. And thus my old industry, Wall Street, has gone backwards on gender diversity, though I think there are few who would argue that was a desired outcome, given the financial crisis.

The road we are on today is to chip away at the gender issue bit by bit by bit. At this rate, we will achieve gender pay parity by 2058. But the discussions of the retirement savings crisis and the economic engagement of women should no longer be separate conversations; they are highly inter-related. And it’s not a question of whether we can afford to make the changes to get women more fully economically engaged….it’s a question of whether we as a country can afford not to.

Oh, and it’s also the fair thing to do.

An abridged version was originally published in The Washington Post. Research support was provided by Cup and Handle Macro Research.

Sallie Krawcheck is the Chair of Ellevate Network and Ellevate Asset Management.Ellevate Network (formerly 85 Broads) is a professional woman’s network, operating across industries and around the world. Both businesses are committed to the full economic engagement of women.

(Photo: Flickr,

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