Women’s Economic Risk Exposure and Retirement Savings Christian Weller and Michele Tolson, McCormack Graduate School of Policy and Global Affairs

Traditional View of Economic Risk Exposure by Gender Economic risk exposure: Determined by stock market investments Lower Stock Investments (Women) Lower Savings Lower Economic Risk Exposure Traditional view: Women invest less in stocks than men and thus have less economic risk exposure, resulting in fewer savings. Higher Stock Investments (Men) Higher Savings Higher Economic Risk Exposure

Our View of Economic Risk Exposure by Gender Economic risk exposure arises from: Easier-to-avoid risks (stocks, housing, business ownership) Harder-to-avoid risks (labor market, caregiving) More Job Uncertainty and Caregiving Responsibilities (Women) Higher Hard-to-Avoid Economic Risk Exposure Lower Savings We test whether women have more hard-to-avoid risks than men. Higher exposure to hard-to-avoid risks may make people hesitant to take on easier-to-avoid savings risk exposure (in the stock market, housing market, and through owning a business). Exposure to multiple sources of risk simultaneously may be detrimental to savings. Less Job Uncertainty and Caregiving Responsibilities (Men) Lower Hard-to-Avoid Economic Risk Exposure Higher Savings

Data and Methodology Data Set: Federal Reserve’s triennial Survey of Consumer Finances (SCF), a nationally representative household survey Years Included: 1989 to 2013: Broken into earlier (1989 to 1998) and later years (2001 to 2013) Key Risk Exposure Variables: High savings risk exposure: Stocks, real estate, and businesses make up more than 75% of assets; Owes more than 25% of assets Caregiving risk exposure: Cares for other people in the household High unemployment risk exposure: Belongs to peer group that has unemployment rate in the top third of all peer-group unemployment rates Concentrated risk exposure: High savings risk exposure, caregiving risk exposure, AND high unemployment risk exposure Diverse risk exposure: High savings risk exposure, caregiving risk exposure, OR high unemployment risk exposure Methodology: Descriptive quantitative analysis using cross-sectional data; Statistical significance of differences confirmed using t-tests Although not presented here today, our work in this area also includes: A number of other risk exposure measures (for example, value at risk, chance of financially supporting others, chance of income losses); More advanced analysis (for example, synthetic cohort approach to test the intertemporal link between risk exposure and household savings).

Risk exposure measures for single women and men between 2001 and 2013 Single women have more risk exposure than single men (in years shown, as well as earlier years of 1989 to 1998) Risk exposure grew for both single women and single men from the earlier to later period. Married women have less risk exposure than married men (partially due to fewer stock and business investments)

Savings risk exposure conditional on other high risk exposures for women between 2001 and 2013, by marital status Single women Married women Low risk exposure High risk exposure Conditional on high unemployment risk exposure 34.3% 37.6% 56.6% 69.2% Conditional on caregiving risk exposure 31.1% 42.6% 47.7% 67.2% and caregiving risk exposure 33.4% 42.8% 56.0% 74.4% Women who have high unemployment risk exposure and/or caregiving risk exposure generally have higher savings risk exposure than those women with less unemployment and/or caregiving risk exposure Similar results found in earlier years (1989 to 1998, not displayed)

Risk protections conditional on caregiving* risk exposure (caring for dependents) between 2001 and 2013, by marital status Single women Married women No caregiving risk exp. Caregiving risk exposure Share of people with defined benefit pensions 23.8% 12.1% 15.7% 12.5% Share of people with liquid financial assets 90.2% 76.1% 91.6% 87.8% Median value of liquid financial assets $ 2,246 $ 1,048 $ 3,823 $ 2,429 Share of people with health insurance 84.9% 77.0% 87.0% 82.8% Share of people with positive value life insurance 16.7% 15.1% 28.1% 21.2% Women with high hard-to-avoid (caregiving and labor market) risk exposure generally have fewer risk protections (as women with less hard-to-avoid risk exposure) Risk protections did not consistently increase from earlier to later years (although risk exposure generally rose) Married women have more risk exposure due to risk of divorce and widowhood, but have more risk protections due to access to income and wealth from spouse * Similar trends (higher risk exposure=lower risk protection) found when looking at unemployment risk exposure

Savings related attitudes by selected risk exposure measures for single women between 2001 and 2013 Savings attitudes conditional on high savings risk exposure Low savings risk exp. High savings risk exp. Share of people, who save 47.3% 38.6% Share of people with long term planning horizons 10.9% 11.4% Savings attitudes conditional on high unemployment risk exposure Low unemp. risk exp. High unemp. risk exp. 50.9% 40.0% 14.7% 8.9% Savings attitudes conditional on caregiving risk exposure (caring for dependents) No caregiving risk exp. Caregiving risk exposure 43.8% 33.9% 12.0% 8.1% Women with higher risk exposure tend to be less likely to save or have long-term planning horizons than women with lower risk exposure. Early years (1989-1998, not displayed): Showed the same trend (higher risk exposure=less likely to save or have long-term planning horizon) Early to later years: Share of people who saved tended to increase; Share of people with long term planning horizons had no consistent upward or downward trend.

Median real retirement. assets for single Median real retirement* assets for single** women between 2001 and 2013, by risk exposure Earlier years (1989 to 1998) also showed higher risk exposure=lower retirement savings We also looked at real wealth, which similarly tended to show higher risk exposure=lower retirement savings (with the exception of savings risk exposure for single women in later years) Harder-to-avoid risk exposure (in the labor market and through caregiving) was consistently associated with lower real retirement assets and lower real wealth * Similar trends (higher risk exposure=lower assets) found when looking at real wealth ** Similar trends also found when looking at married women

Key Findings Women’s risk exposure often exceeds men’s risk exposure Women with difficult-to-control risk exposure through caregiving and/or unemployment are: More likely to have high savings risk exposure Less likely to have key risk protections Less likely to save Less likely to have long-term planning horizons Economic risk exposure correlates with fewer retirement savings (and wealth)

Questions? Women’s Economic Risk Exposure and Retirement Savings | November 17, 2016