Teacher Pensions Blog

The following is a guest post from Kirsten Schmitz, a former LEE Policy fellow at Bellwether. 

There’s a narrative that women are bad investors; they’re risk averse, quick to spend, and ill-informed about their retirement savings. A new report out of Vanguard, however, shows just the opposite.

The study found women are more likely to participate in workplace savings plans, and that when they do, they also contribute in higher amounts than their male counterparts. Further, men and women show almost identical amounts of investment risk.

But despite all this, when it comes to retirement savings, women just can’t win.

Despite women being more likely to participate in plans and contribute higher amounts, the average woman’s retirement account balance is half that of the average man’s. The discrepancy lies within the pay gap. It isn’t that men are superior savers – they just make more money. Vanguard found that when controlling for income, the balance shifted, with women posting higher balances.

Teacher pensions play an interesting role in these findings. Over three-fourths of teachers (76%) are women. Pensions are often lauded as more secure than a defined contribution plan, and a strong choice for females in particular. And for the small percentage of teachers who remain in the classroom (and in the same state) for 30 or more years, pensions may be better. But what about those who don’t?

A changing workforce means many teachers may move out of state, or leave the profession entirely, before gaining any net benefit from their pension plans. The Vanguard report debunks the idea that 401(k) plans disproportionately favor men – women report better outcomes and higher rates of participation.

Because the underlying issue is a pay gap, and not a savings gap, defined contribution plans strike a balance between portability and functionality. According to the Vanguard study, women are more than capable of planning and saving for retirement on their own, at least compared to men, and DC plans such as 401(k)s and 403(b)s would give teachers greater mobility than pensions do.