Factors That Might Lead to Gender Differences in Savings for Retirement - Essay Example

Dynamic labor supply (Retirement) Name of Professor The Name of the School The Date Introduction We can state that the households' life-cycle labor supply decisions often result in men having more and women having less retirement wealth. Stevens & Moulton (2013) states that women are more helpless than men to face life in their old age. It is somewhat because of the way that they work less contrasted with men over their workings lives making them accumulate fewer savings to utilize during their retirement age. Another important factor that contributes to the fact that women face poverty during their retirement age is the fact that averagely, women leave longer than their men counterparts and their little earnings are being spread over a longer period. Furthermore, women face many chronic health problems during their old age. Many scholars like Pozzabon & Mitchel (1989) states that retirement's savings are taking new dimension where investments are being made as far as financial related resources. The bit of the private benefits that are characterized commitment arrangements is persistently expanding and the strategy thinkers including the government are thinking about the privatization of the standardized savings. In such circumstances, women' prosperity in the retirements will completely depend on more on their demeanor toward danger and the particular effect of their states of mind on the venture choice which they take. As the retirements reserve funds are gradually moving far from the focal government binding commitment, it is imperative for women to consider differentiating their speculation choices and be more open to interests in the benefits financial and another accessible venture arranges in the companies sector. It can only change with a change in attitude and priority. Bernasek & Shwiff (2001) states that with the recent economic development and the increasing development of defined contribution retirement plans; this has made each and everyone to be personally liable for their financial security in the old age. The financial related security relies on upon the capacity of people to have the capacity to gather more wealth. This wealth is an exceptionally huge source of retirement wage for individuals who are not ready to simply depend on the government-managed savings and companies gave characterized advantage benefits plan to a large portion of the general population working in their organization. The constant gap in wealth amongst men and women is bringing eyebrow up in this specific financial patterns. Kimmel and Connolly (2007) in his study observed that this specific gap still exists regardless of the possibility that after controlling individual attributes. The gender gap in wealth amid the retirement is something which is a reason for worry if not tended to in time and this should be handle by both government and individual themselves. Households' life-cycle labor supply decisions often result in men having more and women having less retirement wealth The last half of the twentieth century was a time of emotional change in the part that women play in the public eye, highlighted most unmistakably by the fast ascent in paid companies of moms with young children (Kimmel & Connolly, 2007). At present, around 60 percent of moms with kids younger than six take an interest in the paid work power. As moms have expanded their paid work endeavors, clashes amongst job and family obligations have developed, driving analysts to investigate all the more completely the part that caregiving obligations play in Moms' opportunity decisions and the impacts that these decisions might be relied upon to have on their children (Athanasius, Low, and Sanchez-Marcos, 2008). Neelakantan & Chang (2010) presumed that spouses on open financial doors have a tendency to be an irrelevant determinants of their retirement designs. The outcomes negate results on the male specialists where open financial doors tend to assume a critical part in their wealth collection. The results of the study further reveal that married women tend to spend more time at home than in their workings lives (Neelakantan & Chang, 2010). Women prefer older men than themselves and in turn, many have turned to take care of their men and the family increasing the financial constrain on women. They value child care than work hence leaving them with very little time to work and save for themselves. Women spend most of the time home doing their home duty instead of working, French (2005) stratified time outside the labor market into home production and pure leisure, and this time does not result in any retirement savings since it is consumption real time but not the time to generate more income. This explains why the family roles and division of labor contributed towards women poverty during the old age and fewer savings for their retirements (Athanasius, Low, and Sanchez-Marcos, 2008) Factors might lead to gender differences in savings for retirement On the point of view of the newly characterized annuity commitment which altogether relies on upon individual speculation choices, women are thought to be more hazard disinclined than men when their whole arrangement of benefits is viewed as (Rust, 1989). In circumstances where women are averagely less eager to go out on a limb than their male partners, they are likewise anticipated that would have the capacity to amass fewer wealth by and large since they are danger unwilling henceforth connected with venture which is less hazardous which like this gives lower returns by and large. Hence, this clarified why they have lower returns amid their retirement age since they contributed less bringing about the wealth gap amongst men and women (Rust, 1989). Another researchers has particularly taken a look at the annuity resources and individual ability to go out on a limb as one of the premises of assigning their benefits to benefits stock or bond. The study by Athanasius, Low, and Sanchez-Marcos (2008) found that most women contribute their small percentage of their benefits to stock instead of Bond. Since the stock is more hazardous than a bond, the arrival on bonds is less contrasted with profit for stock subsequently facilitate clarify the gap amongst men and women wealth. The apparent risk difference between men and women has been mostly attributed to many factors (Athanasius, Low & Sanchez-Marcos, 2008). Some have argued that the difference comes as a result of biological difference. Some have invoked evolution and suggested that women have adapted toward lower levels of risk because they have the greater responsibility than men regarding reproduction and childcare. Stevens & Moulton (2013). Clearly captures the gender differences in the asset allocation of pension plans. He concluded that gender and marital status significantly affect how individuals allocate his assets in the DC plans. However, the study reveals that risk aversion is more common in female investors due to their limited financial knowledge hence education is also a factor contributing to the wealth gap between men and women. Furthermore, factors that might influence risk tolerance is the income. Athanasius, Low & Sanchez-Marcos (2006). States that lower levels of income normally results to lower risk level. They concluded that wealthy individual can sustain more financial losses than less well-off people. This explains the risk averseness in women. Across all industries, women are paid less compared to male, and this results to low income for women since women are earning less, they are not able to sustain many financial losses for hence will tend to invest in less risky assets leading to less wealth accumulation resulting to this not ending gap. Marital status also influences the risk behavior of an individual which further results in the investment patterns leading to different wealth accumulation. Married people, for instance, shows that they are less tolerance for risk while unmarried people are more tolerance resulting to married women depending on their husband’s pension savings in their old age as compared to their savings. In a contrary opinion, Stevens & Moulton (2013) found that single women were less risk tolerant than single men or married couples while Neelakantan & Chang (2010) found that single women are less risk tolerant than single men. These behavior influence the saving patterns of both men and women, and the result is the amount of wealth that has been accumulated. Lastly, the employment turnover in women is higher than that of men; this affects the savings patterns hence wealth accumulation. Women start working late in life and retire earlier than men; this makes them save less in their working lives compared to men who works longer time hence saving more. These explained the difference in the wealth gap between men and women. Public policies options should the government consider boosting the retirement wealth of women Some of the public policy options which any government should focus on boosting the retirement wealth of women include:- Increase financial literature: - There is a need to increase financial literature of women across the globe. The government can facilitate this by focusing on a non-conservative saving approach which would result in women being aware of the need to save and types of savings (Kimmel & Connolly, 2007). This would result in accumulation of wealth through investment diversification and higher return resulting to a reduction in wealth gap as a result of increased wealth accumulation. Health Insurance: - Government should focus on health insurance boost as many women spend most of their retirement income on health during retirement period. By coming in to with insurance for health, the old women will be able to utilize little income purely on sustaining their livelihood hence improving their living standards (Kimmel & Connolly, 2007). Job Security for women: - Government should enact legislation that protects women who work and still gives birth to children. They should be given a flexible working environment which can enable them to look after their young ones and at the same time work to accumulate wealth. This strategy may include pay leaves and maternity leaves which are fully paid (Kimmel & Connolly, 2007). Pay increase: - The government should impose equal pay for people in the same job group. Low wealth accumulation results from the low pay of women. This payment disparities can be avoided by ensuring that people of the same job group are paid equally, and this will enable women to work diligently and accumulate enough savings. This will result in women having equal savings and better life in their old age (Neelakantan & Chang, 2010). Conclusion The gender gap in wealth at retirement has been a concern for many and policy makers. Purely it does not reflect individual choices based on heterogeneous factors and preferences but also includes government policy and household decisions. Most of the literature have focused on the nature of women as risk-averse individuals who only consider small investments which give them lower return during the old age (Pozzabon & Mitchel, 1989). The study reveals the common household factors on the labor supply and how this influence women retirement savings. For instance, most families consider women to handle family chores like taking care of young ones which are considered as leisure and does not add any savings or income for them in old age. Though marital status influence the risk behavior of an individual which further results in the investment patterns leading to different wealth accumulation, the government should come up with affirmative action in ensuring that women are given equal chance to have savings that could protect them in the old age. On the perspective of the newly defined pension contribution which entirely depends on individual investment decisions, women are considered to be more risk averse than men. More so when their entire portfolio of assets is considered, with proper financial education this will be a thing of the past and both genders will be at par in terms of wealth accumulation. Reference Attanasio, O., Low, H. W., & Sanchez-Marcos, V. (2006). Explaining changes in female labour supply in a life-cycle model. Attanasio, O., Low, H., & Sanchez-Marcos, V. (2008). Explaining changes in female labor supply in a life-cycle model. The American Economic Review, 1517-1552. Bernasek, A & Shwiff, S (2001) “Gender, Risk, and Retirement” Journal of Economic Issues, 35(2), p. 345 – 356. French, E. (2005). The effects of health, wealth, and wages on labour supply and retirement behaviour. The Review of Economic Studies, 72(2), 395-427. Kimmel, J & Connolly, R (2007) “Mothers’ Time Choices: Caregiving, Leisure, Home Production, and Paid Work” Journal of Human Resources, 62(3), p. 643 – 681. Neelakantan, U & and Chang, Y (2010) “Gender Differences in Wealth at Retirement” American Economic Review, May, p. 362 – 367. Pozzabon, S & Mitchel, O (1989) “Married Women’s Retirement Behavior” Journal of Population Economics, 2, p. 39 – 53. Rust, J. P. (1989). A dynamic programming model of retirement behavior. In The economics of aging (pp. 359-404). University of Chicago Press. Stevens, A. H., & Moulton, J. (2013). ‘Effects of Late-Life Job Loss on Wealth and Labor Supply. Lifecycle Events and Their Consequences: Job Loss, Family Change, and Declines in Health. 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