How Women Can Increase Odds of Saving Enough for Retirement

A woman puts a coin in a piggy bank. — (Image credit: Getty Images)

Women today are still vastly underpaid, and often underappreciated, compared to men in similar lines of work. These issues, along with others, contribute to women facing bigger challenges when it comes to saving for their retirement. Let’s explore how they can be empowered to take control of their finances.

First, what are the unique financial challenges women face today?

Life expectancy

On average, women are living longer than men. Life expectancy may be longer for everyone than it was 50 or 60 years ago, but women are still outliving men. Nowadays, women are living about six years longer than men, according to the Centers for Disease Control. If women live six years longer than their partners, they will need money to last longer during their retirement.

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Needing more money is a big concern because many women say they are not on track for retirement. Just four in 10 women say they feel financially secure, and only 44% think they will be prepared to retire, according to Northwestern Mutual’s 2023 Planning & Progress Survey. These are alarming numbers when you compare this to 61% of men who believe they will be ready to retire.

Outliving their assets in retirement is one of the biggest fears for retirees. This is why it’s so important to build up your savings and retirement accounts. Retirement could potentially last two or three decades.

Gender pay gap

We know that women tend to be compensated less than their male counterparts making it especially hard for women to save as much as they should. For every dollar a man makes, a woman makes just 84 cents, according to the U.S. Census Bureau. It’s an unfortunate reality that women are faced with. When women are paid less, it’s hard for them to put enough money away in savings or for retirement. Your Social Security benefits are based on income, so if a woman is earning less over her career, her benefits will also be reduced.

In some cases, women are forced to stop working sooner or take a part-time job because they assume caretaking roles for both their children and their aging parents. In addition, many women are encouraged to take “gender-stereotypical roles” that traditionally pay less money, like teachers or administrative assistants.

So what can women do to improve their ability to save for retirement?

Improve financial literacy

One of the biggest pieces of advice I give to my clients is the importance of education. Many people I meet with don’t understand how much they can contribute to their 401(k) or that they could have more than one retirement account. This is why it’s important to work with a financial adviser. By becoming more financially literate, you are more equipped to handle and improve your financial situation.

Education is a key component of financial planning, especially for women. The most important job for any financial adviser is to help their clients understand what they have in the bank and help them make educated decisions on what to do with it.

Outside of meeting with an adviser, you can also improve your financial literacy on your own. Listen to personal financial podcasts or read a book that covers basics like budgeting and saving. At the end of the day, there are many different options for your retirement savings, and a financial adviser can help you determine which options are best for your specific financial situation.

Focus on building your retirement nest egg

The average 401(k) balance for men is $89,000, compared with $59,000 for women. Surprisingly, nearly half of female workers don’t participate in a 401(k) plan at all! I tell all of my clients that if they have the option, they should make all of their contributions automatic, whether that is through an employer-sponsored 401(k) or for other retirement accounts. When you make it automatic, you don’t need to think about it. It’s a set-it-and-forget-it mindset.

Another important thing to ask is: Does your employer offer a matching 401(k) contribution? If so, are you taking advantage of it? If you aren’t, you should be. Not contributing enough to get the company match means you are leaving free money on the table.

Everyone needs to implement good financial habits as early as they can. I recommend that my clients put 10% to 15% of their paychecks into savings and retirement accounts. The more you are saving today, the more you will have down the road when you retire. While women are currently at a disadvantage with their finances compared to men, hopefully, this begins to change in the future.

But until we see the pay gap tighten, it’s especially important that women feel empowered to take control of their finances so they can make their savings last through retirement.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jay Dorso has more than 25 years of experience in the financial industry. At Quality Senior Benefits, Jay specializes in helping seniors with every area of retirement planning. From Medicare plans to insurance and long-term care, Jay helps set his clients up for success in retirement. Quality Senior Benefits is an independent firm that offers a wide range of insurance and financial services products.