U.S. households’ retirement difficulties are exacerbated by social inequality, according to a recent report, especially gender inequality—but improving retirement plan design could provide a partial solution.

The median annual income for women aged 65 and older is 42 percent lower than that of men, according to “Closing the Retirement Income Gender Gap: The Opportunity Is Now,” a paper by Newark, N.J.-based Prudential.

“Plan sponsors should find this retirement-income gender gap alarming,” wrote the researchers. “Fortunately, plan sponsors can help close the retirement-income gender gap through customized plan design, participant engagement programs, and holistic education that focuses on participants’ financial wellness—their ability to achieve the foundational elements of financial security: managing day-to-day finances, protecting against key risks, and achieving important financial goals.”

Currently, women constitute 47% of the U.S. workforce, and 40% of working women are in managerial and professional positions, according to the report. That represents significant progress since 1975, when just 18 percent of working women were in managerial or professional jobs.

Yet a significant earnings gap between men and women persists. In the U.S., an average working woman earns 21 percent less than an average working man. While a portion of this earnings gap is caused by different career and lifestyle choices between men and women, gender discrimination still sandbags women’s ability to earn an income and thrive during their working years.

The gender earnings gap has implications for women as they age. For example, the average woman qualifies for Social Security benefits 23% lower than the average man.

Less income also translates to a decreased ability to save for retirement: The average woman has saved 32% less for retirement than the average man, according to the report.

Unique Challenges

Women also face a particular set of retirement challenges, the most obvious being longevity. On average, women have life expectancies five years longer than men, requiring higher levels of retirement saving. The report’s authors also found that women face higher retirement health-care costs, needing an average of $140,000 by age 65 to have a 90% chance of covering their health care costs, versus $124,000 for men.

The report’s authors also note that women are more likely to spend their senior years single than men. Not only are there more older women than older men, divorce has become more prevalent and accepted and a higher proportion of women are choosing to remain single – or never marry in the first place. After age 65, only 45% of women are married, compared with 70% of men. Single and divorced indviduals can't pool resources with a spouse.

The researchers also found that one-third of women over age 65 are widows. Household income tends to drop faster than household expenses when a spouse dies, according to the report, which may leave the surviving spouse unable to fit their lifestyle into their income.

Women also face more time limitations than men. Women are more likely to be responsible for the lion’s share of household tasks, spend more time doing unpaid work than men, and are almost twice as likely to be a caretaker for a friend or family member than men.

Debt, Procrastination And Pessimism

Debt has also become a significant obstacle to women’s retirement success—especially student loan debt. Women are more likely to graduate with “excessive” debt, defined as debt levels that are 10% or more than their monthly gross income. Twenty-nine percent of women and 24% of men graduate with excessive debt.

Some of the retirement-income gap is behavioral, as the researchers found signs of procrastination among women. Women are less likely to set retirement goals than men are.

Prudential’s qualitative research has found that the earnings, Social Security and savings gap has led to higher levels of financial pessimism among women. Earlier this year, 25% of the women in a Prudential survey reported that they don’t think they will ever be able to retire, compared with 14% of men.

But the report’s authors also found that, as things currently stand, women are less likely to work past the age of 65 than men. While one-in-five men works past 65, only one-in-seven women do the same. The authors expect that gap to close by 2024.

In the meantime, the researchers suggest that employers and advisors may want to focus on helping their employees retire at the age they want. Not only do delayed retirements negatively impact the morale of other employees and create difficulty in recruiting and retaining new talent, but “research and analysis regarding the impact of delayed retirements on employers’ costs have shown that, using national averages for private sector workers, a one-year increase in the average retirement age results in an average annual incremental run rate of about 1%–1.5% of workforce costs. This is about half the average annual employer cost of running a defined contribution plan.”

Building Women Better DC plans

The researchers also called for more engagement and education of plan participants, including the addition of financial wellness programs to defined contribution plans. While wellness programs may improve the financial health of all participants, they can also be “designed to address the needs of specific employee segments, such as female employees, and to provide a combination of education, guidance, tools, and solutions that help improve financial health.”

Employers and advisors can use technology to create more opportunities for engagement, and plan sponsors can use plans to encourage participants to take proactive steps towards financial health and retirement. Technology can also make available to participants the budgeting and planning tools necessary to build, grow and track their income, spending, saving and investing over time.

The researchers also recommended the adoption of both automatic enrollment and automatic escalation within retirement plans to increase participation and boost savings rates. They also called for a greater adoption of target-date funds as default investment options within retirement plans.

Finally, the report’s authors call for the inclusion of more lifetime income options—including annuity products— in the defined-contribution plan space. They note that because of unisex pricing, annuities offer a better deal to women, with their longer life expectancy, than men. Nearly three-quarters of female defined-contribution plan participants identified a guaranteed lifetime income option as an important feature of a plan.

Researchers at Prudential analyzed census, U.S. Department of Health and Human Services, Social Security and Prudential’s own retirement data for their report.