Women have long been at a disadvantage in accumulating retirement wealth, but baby boomers are starting to narrow the gender gap. A dramatic increase in pension accumulation by females ages 45-53 was discovered in a recent study conducted by Vickie Bajtelsmit, associate professor of finance and real estate and Nancy Jianakoplos, associate professor of economics at Colorado State University.
The study compared participation and accumulation in pension plans by working men and women in five different age groups from 1989 to 1998. The results found that women’s pension balances rose from 40 to 44 percent of their male counterparts. The narrowing of the gender gap was primarily accomplished by female baby boomers. For this age group the ratio substantially improved from 35 to 63 percent.
The improvement in retirement wealth for women was seen only in the baby boomer group. Other age groups saw a widening of pension gender gap over the decade. The disparity was the most extreme for women ages 27-35. When the study began, men and women of this age group were almost equal in pension accumulation. Nine years later women’s retirement balances were only 45 percent of their male counterparts. "The most obvious explanation for this change would be an interruption in labor force participation by women during childbearing years," said Bajtelsmit.
Differences in pension accumulation between men and women are attributed to the earnings gap – women earn approximately 57 percent of their male counterparts’ wages – and differences in investment strategies. Employed women with defined contribution plans, such as 401K’s, are more likely to invest in low-risk, low-return assets than men, and this difference increased measurably over the decade.
"Further improvements in closing the gender pension gap will come only with changes in women’s labor force experience and investment decision making," said Bajtelsmit.
Overall participation of women in pension or retirement plans at their current job increased from 43 to 45 percent during the study, while men declined from 53 to 52 percent.
The significant change in the type of retirement plan in which workers participated was also a key finding in the study. For both women and men, the percentage of defined contribution retirement plans increased dramatically, while defined benefit pension plans dropped sharply.
For more information about the study, contact Bajtelsmit at (970) 491-0610 or Jianakoplos at (970) 491-6537.