There is a gender pay gap, it is a real phenomenon, but it has beeen overshadowed another inequality that has the same potential to threaten the long-term financial stability of women: the glaring gender gap in retirement savings.
In the USA in 2011, the average IRA owned by a man had a balance of $114,745 while the average balance for a woman was $66,529. At age 70, median balances were $72,971 for men and $42,926 for women.
There are several reasons why women need to save more aggressively than their male counterparts. Here are some:
1. Women often have fewer years in the workforce
Many women don't earn as much as men and often end up working less because they take time off to have children at some point during their careers. This means in order to have more in retirement, more of income earned while working needs to be saved according to financial planners. Tough when money is needed for running the home, easier if a women is in a relationship where both parties contribute to the home. A better solution, pay women more money when they are working, close the gender gap.
2. Women may be more conservative in their investments
Women have a tendency to be more conservative then most men, when investing. While conservative investing can keep money safe, it may also mean women don't earn high enough returns to build a comfortable nest egg. The conservative approach works because women tend to ask more questions and be more likely to stick with their investment decisions, which can be a good thing in a tumultuous market environment. Women may be encouraged to take larger risks when investing, but this only benefits the sellers of financial products. Over the long term a conservative investor can do well if they aim for a rate of return that is one or two points higher than inflation.
In the USA in 2011, the average IRA owned by a man had a balance of $114,745 while the average balance for a woman was $66,529. At age 70, median balances were $72,971 for men and $42,926 for women.
There are several reasons why women need to save more aggressively than their male counterparts. Here are some:
1. Women often have fewer years in the workforce
Many women don't earn as much as men and often end up working less because they take time off to have children at some point during their careers. This means in order to have more in retirement, more of income earned while working needs to be saved according to financial planners. Tough when money is needed for running the home, easier if a women is in a relationship where both parties contribute to the home. A better solution, pay women more money when they are working, close the gender gap.
2. Women may be more conservative in their investments
Women have a tendency to be more conservative then most men, when investing. While conservative investing can keep money safe, it may also mean women don't earn high enough returns to build a comfortable nest egg. The conservative approach works because women tend to ask more questions and be more likely to stick with their investment decisions, which can be a good thing in a tumultuous market environment. Women may be encouraged to take larger risks when investing, but this only benefits the sellers of financial products. Over the long term a conservative investor can do well if they aim for a rate of return that is one or two points higher than inflation.
3. Women don't necessarily plan for themselves
Whether it be letting a man make their investment decisions or thinking a husband's Social Security or pension will sustain them, many women make the mistake of not being in charge of their own retirement plans.
Part of the problem may lie with advisers who assume men are the decision makers. Women shouldn't be afraid to speak up during investment discussions and they should seek out women who are professional money managers, as many men discount the opinions of women when it comes to investing.
Women live longer than men so about 50 to 60 percent of women will be single (at some point) in retirement. Those women might be divorced, widowed or single by choice. Regardless of the reason, they need to be prepared to care for themselves during their final years.
5. Women may place others' needs ahead of their own
It's unfortunate that children and grandchildren may not feel an obligation to help their mothers and grandmothers because, in some cases, those older women may not have retirement savings since they prioritized their families above themselves.
Men when asked to name a common mistake women make about investing is that women worry about everyone else and do not put themselves first.
That means college funds get money before retirement plans, and family needs are placed before savings and this is needed in today's economy but women should still put themselves first. The old adage, pay yourself first still applies when you are retired and women need to consider themselves as well as their loved ones and families. Helping loved ones, should never mean putting yourself at risk.
If enough women take control in these ways, the gender gap in retirement savings could become a thing of past.
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