Women experience a retirement savings gap of 30%: Mercer 

Second annual Mercer Retirement Readiness Barometer finds that women, on average, retire with account balances 30% lower than men, and must work two years longer

  • In an analysis of Group Retirement Income Plan account balances, Mercer found that women retire 30% less wealthy than men. Women, therefore, have a lower annual income in retirement, and reduced standard of living.
  • Women save less than men in their workplace retirement savings programs. The savings rate gap, of nearly 1%, reflects similar disparities, such as the gender pay gap and greater likelihood of career disruption.
  • Due to reduced savings at retirement and greater longevity, all else being equal, women must work two years longer than men to be retirement ready.
  • On the positive side, the investment return of women’s savings accounts edged out men’s by .1 of a percent. But even slightly superior investment performance is not enough to bridge the gap.

Toronto, Canada, March 2, 2021 – Women retire 30% less wealthy than men, and must work two years longer to be retirement-ready, according to the 2nd annual Mercer Retirement Readiness Barometer.

The Barometer, which looks to gauge the retirement readiness of different groups in Canadian society, found that women enter retirement with lower retirement savings than men. They also must work longer to achieve retirement readiness.

In an analysis of over 14,000 Group Retirement Income Plan account balances, Mercer found that recently retired women have, on average, an account balance that is approximately $30,000 lower than their male counterparts. With men retiring with an average account balance approximately $100,000, this represents a savings gap of 30%.

This is largely due to a lower overall savings rate. New Mercer research on savings rates shows that women, on average, experience a savings rate gap of nearly 1% (0.81%). All else equal, this savings rate gap means that women need to work two years longer than men to be ready for retirement.

But all else is not equal. While individual circumstances vary, there are universal headwinds at play, such as a persistent gender pay gap and a much greater likelihood of experiencing interruptions during a woman’s career, a phenomenon that has been particularly acute throughout the COVID-19 pandemic.

Each interruption of a woman’s career – for example, having to take time off to be caregiver for a relative who has contracted COVID-19, or to be a caretaker for children in virtual learning – compounds this disadvantage, increasing the likelihood that she will outlive her savings.

If these headwinds are not resolved, this retirement readiness gap is likely to get even worse. But organizations that make the investments needed to close that gap will reap the rewards.

“Despite doing everything right relative to their savings, in our analysis we found that due to structural factors, women are retiring less wealthy than men,” says Jillian Kennedy, a Partner at Mercer and the Leader of the firm’s Financial Wellness business. “It’s incumbent on employers to do everything in their power to resolve the retirement savings gap.”

In an additional Mercer analysis of 600,000 plan participant accounts, over a five year period, it was additionally found that women’s investment performance equalled – or exceeded – men’s. In every age group examined, despite lower savings rates, accounts held by women showed slightly higher average returns (.1 of a percent). This is likely due to women’s greater affinity for diversified solutions within workplace retirement benefit programs – again observed across age groups.

Together, the savings gap and slightly superior investment performance highlight the fact that the gap in women’s retirement savings cannot be understood in isolation. Employers need to see the broader structural factors at play, such as persistent pay and workplace inequities.

Employers need to do everything possible to reduce structural barriers. Employers should begin by conducting a retirement readiness diagnostic, which examines an organization’s workforce’s retirement readiness holistically, men, women, young and old.

Every employee faces different retirement challenges. Women, particularly in the COVID era, face more than most, meaning some organizations may benefit from financial wellbeing reforms specific to women. Foremost among these is working to close the pay gap, which is quickly becoming not just an ethical necessity but a regulatory requirement across Canada.

Employers should also consider a plan design review – a competitive review of the fees that plan members incur, and a check to ensure that your plan accounts for the realities of decumulation in an uncertain economic future.

Employers should invest in proactive communication, to build awareness of the savings tools available to employees, as well as any employer matching benefits that may be available. That may look like announcements at all-staff meetings, a regular e-mail cadence, or one to one meetings with managers. It may also mean moving to a digital-first approach to retirement benefits, as employees are digital-first in every other aspect of their lives, from communication to online shopping.

Finally, employers must put common-sense investment policies into place, like defaulting employees into Target Date Funds, or other investment solutions that meet employee needs. It remains the case that employees looking to be retirement-ready must not be content with fixed income assets but instead must look for growth. Defaulting plan members into Target Date Funds is an excellent way to make the smart decision the easiest decision, too.

Retirement stress affect employee morale, productivity, and ultimately the bottom line. Organizations that work to close the retirement savings gap will help relieve this stress on their entire workforce – and bolster their performance.

“Financial wellness means giving employees both the knowledge and the ability to chart their financial future,” concludes Kennedy. “It’s not just the right thing to do – it’s the smart thing to do. Organizations that invest will see the impact to their productivity, their workforce morale, and ultimately, their bottom line.”

About the Mercer Retirement Readiness Barometer

The Mercer Retirement Readiness Barometer measures the age in which different personas can comfortably retire based on their participation within an employer-sponsored DC plan and benefits provided by the government (like CPP/QPP/OAS).


All personas contribute are assumed to contribute the same rate annually to their company plan over their course of their career. In retirement, income will be sourced from their company plan savings as well as government programs such Old Age Security and Canada/Quebec Pension Plan. The retirement readiness age is based on the age they can replace 70% of their income in retirement without outliving their savings.

Each persona is assumed to be invested in the target date asset mix based on the Mercer target date fund glide path. Retirement savings are projected forward using 1000 different economic scenarios. Results shown are based on a 75% confidence interval (over 1000 economic scenarios).

The total savings rate of 10% that is used to anchor this analysis is based insights from Mercer’s proprietary defined contribution plan design database which includes plan design data from over 400 plans across a wide array of sectors and industries. For the gender analysis, savings rates of 9.05% and 9.86% were modelled. These rates are derived from an analysis of over 21,000 group plan accounts of a major insurance company in Canada.

The observed 0.81% savings gap was derived from a review of over 22,000 data points from a major Canadian insurance company as of November 13, 2020.

About Mercer 

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 85,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including MarshGuy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.ca. Follow Mercer on Twitter @MercerCanada.

This does not contain investment advice relating to an individual’s particular circumstances. No investment decision should be made without first obtaining appropriate professional advice and considering individual circumstances.

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