retirement

COVID-19 Exposes Cracks in Financial Equality for Women

Women are more vulnerable during this time of financial upheaval. Here’s why and some steps they can take to help improve their outlook long term.

The COVID-19 pandemic is further exposing the financial inequities between men and women and is threatening to undo the few steps forward women have taken over the past several decades in the workforce and in their bank accounts.

As of December 2019, women held more jobs than men, but on average, women still face a pay gap of 82 cents to the dollar and an even more dangerous wealth gap of 32 cents to every dollar owned by a man. Women are already financially behind, and the virus is having a disproportionately more painful impact on women in terms of job loss, reduced savings and mounting debt, creating serious financial headwinds for women. 

Job Losses Hit Women Harder

According to the National Women’s Law Center, women and minorities are much more vulnerable during times of job loss. Two-thirds of minimum wage workers in our nation are women, many of whom are moms with a higher risk of layoffs, and few enjoy paid leave or health insurance. These women typically have less tenure due to movement in and out of the workforce to care for young children or aging parents. This lack of tenure, combined with lower-ranking positions, stacks the decks even further against women, who lose their jobs at disproportionately high rates during times of financial downturns.

The majority of those filing for unemployment due to COVID-19 are women. According to Pew Research, women lost 11.5 million jobs compared to 9 million men from February to May.  Since the outbreak hit, nearly one in five women report that they have lost their job, and of the 700,000 jobs lost in March 2020, 60% impacted women. With job losses in March falling disproportionately on women, women no longer surpass men on U.S. company payrolls. This is not the first time that women’s careers have been derailed due to layoffs. During the Great Recession from 2007-2009, 12.5% of women lost their jobs, compared with only 8.8% of men.

Pay Gap Adds to Problems

Even before this crisis, women were paid less than men, and as a result, women contribute less to their 401(k)s than men. According to the 2019 T. Rowe Price Retirement Savings and Spending study, millennial women are contributing only 6% of their salaries to their 401(k), versus 8% for men. The percentage improves slightly for boomers, but women still trail their male peers, saving only 8% versus 10%. It remains to be seen if those savings figures will decline, and if the gap will widen in 2020, due to the pandemic.

The harsh reality is that because women are paid less than men, they have less in savings and fewer dollars to fund their golden years. According to the 2019 Bank of America Merrill Lynch Workplace Benefits Report, women come to retirement with $70,000 less than men. The severity of the situation becomes apparent when you realize that women live an average of five years longer than men and have significantly higher medical costs in older age. If anything, women should be starting retirement with much more padding in their nest eggs.

While the CARES Act offers immediate relief in the form of allowing Americans to withdraw up to $100,000 from a retirement account (IRA, 401(k), etc.) without having to pay a 10% penalty, doing so is even more dangerous for women. As we’ve seen, women are already behind financially. Taking money out of your retirement account leaves less for the future and locks in your losses, as most retirement plans have taken a hit due to recent market declines. The dollars that you take out now to pay current bills will miss out on the market recovery that we expect over the next several years. This is a Band-Aid solution that does not address the real issues and realities that make women economically vulnerable.

Practical Advice for Women Right Now

Hopefully, this will eventually return to normal. However, the heightened financial stress that COVID-19 has placed on women can serve as a catalyst for incorporating healthier financial practices. For example:

  • Cut unnecessary expenses, such as subscription services or services you’ve learned to do on your own while in quarantine.
  • If you’re planning on purchasing any big-ticket items this year, make sure you look at multiple companies and do your research on the best prices.
  • And maybe most important, begin tracking your new monthly expenses. You want to be aware of where your money is going so that you can eventually have more control over where you want your money to go.

While COVID-19 has exposed that systematic gender-inequality persists in the workplace, we can still act on things within our control to better prepare for our financial future.

About the Author

Stacy Francis, CFP®, CDFA®, CES™

President & CEO, Francis Financial Inc.

Stacy is a nationally recognized financial expert and the President and CEO of Francis Financial Inc., which she founded 15 years ago. She is a Certified Financial Planner® (CFP®) and Certified Divorce Financial Analyst® (CDFA®) who provides advice to women going through transitions, such as divorce, widowhood and sudden wealth. She is also the founder of Savvy Ladies™, a nonprofit that has provided free personal finance education and resources to over 15,000 women.

Most Popular

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement
retirement planning

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement

When it comes to retirement planning, educating yourself can keep you from making big mistakes. Here are three key lessons that everyone preparing for…
May 24, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022

Recommended

Do You Realize the Power of HSAs? Probably Not!
health savings accounts

Do You Realize the Power of HSAs? Probably Not!

Health savings accounts have tax-zapping superpowers. Check out these top 10 tips to help maximize the benefits of your own HSA.
May 27, 2022
4 Keys to Planning Your Hard-Earned Retirement Income Distributions
retirement planning

4 Keys to Planning Your Hard-Earned Retirement Income Distributions

The fear of running out of money in retirement is understandable. When you have a well-thought-out retirement income plan, you can quit worrying.
May 27, 2022
Short-Term Insurance Plans' Good, Bad and Ugly
retirement

Short-Term Insurance Plans' Good, Bad and Ugly

You'll need a squinty-eyed analysis to gauge the value of short-term care insurance plans and if they're right for you.
May 26, 2022
Don’t Want to Leave Money to Your Kids? You’ll Probably Change Your Mind.
estate planning

Don’t Want to Leave Money to Your Kids? You’ll Probably Change Your Mind.

How much is too much to leave your children? You may be surprised.
May 26, 2022