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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
Related Content
- Tips to Help Single Women Struggling to Save for Retirement
- How Can Women Worried About Retirement Stay on Track?
- Three Steps for Women to Take Control of Their Finances
- Six Ways Women Can Overcome Any Financial Obstacles Holding Them Back
- Women and Money: Three Ways to Plan for the Future as Life Happens
-
How to Navigate Your Medicare Advantage Plan in a DisasterIf you're a Medicare Advantage member in an area that has been impacted by a disaster, you might be worried about access to care and medicine. Here's what you need to know.
-
Older Investors: Boost Your Savings and Retire EarlierThis one measure can help older investors retire up to two years earlier and potentially double their retirement savings.
-
I'm a Financial Adviser: This Is How You Could Be Leaving Six Figures in Social Security on the TableClaiming Social Security is about more than filing paperwork and expecting a check. When you do it and how you do it have huge financial implications that last the rest of your life.
-
The Big Pause: Why Are So Many Americans Afraid to Retire?While new research sheds light on Americans' growing reluctance to quit work in later life, can anything be done to help those with the retirement jitters?
-
Five Under-the-Radar Shifts Investors and Job Seekers Can't Afford to Ignore Under the OBBBBeyond the headlines: The new tax law's true impact for job seekers and investors lies in how it will transform industries and create opportunities in areas such as regional accounting, AI and outsourced business services.
-
I'm a Financial Professional: It's Time to Stop Planning Your Retirement Like It's 1995Today's retirement isn't the same as in your parents' day. You need to be prepared for a much longer time frame and make a plan with purpose in mind.
-
An Attorney's Guide to Your Evolving Estate Plan: Set-It-and-Forget-It Won't WorkWhen did you last review your will? Before kids? Before a big move? An update is essential, but regular reviews are even better. Here's why.
-
For a Richer Retirement, Follow These Five Golden RulesThese Golden Rules of Retirement Planning, developed by a financial pro with many years of experience, can help you build a plan that delivers increased income and liquid savings while also reducing risk.
-
Time for a Money Checkup: An Expert Guide to Realigning Your Financial GPSEven if your financial plan is on autopilot, now is the perfect time to make sure it's still aligned with your goals, especially if retirement is on the horizon.
-
Five Things to Do if You're Forced Into Early Retirement (and How to Reset and Recover)Developing a solid retirement plan — before a layoff — can help you to adapt to unexpected changes in your timeline. Once the initial panic eases, you can confidently reimagine what's next.
