Many women face a gap in retirement savings. Why? Multiple factors conspire together to drive the average woman’s retirement savings level far below the average mans. Today I’ll be talking about what the factors are that drive this gap in savings, and what we can do about it. I’m working on this with Ellevest, a finance and technology company working specifically on helping women plan and invest for their financial future. I’m genuinely excited about this relationship– I’ll tell you a bit more about why toward the end.
Money Is Genderless – Except When It’s Not
I’ve talked before about how your money itself is genderless, and I still strongly believe in this. Once you have a dollar, a woman’s investment will perform exactly the same as an investment held by a man in the same investment vehicle. Although true, in order to get that dollar, we women often have to overcome obstacles that are different than those faced by men. Back on my original post several of my fellow financially-minded friends commented about those differences, and I wanted to talk about them a bit more today.
We women have some specific, unique circumstances in our lives that we need to take into account in our financial planning:
The pay gap – Sadly women still only around 80 cents on the dollar as compared with men (per the Institute for Women’s Policy Research). The gap even wider for women of color or disabled women. This means we, on average, make less than men.
The longevity gap – Women typically live longer than men. Per the Social Security site, a man at 65 can expect to live until 84.3, while a woman will live until 86.6. This means we, on average, live nearly three years longer then men.
The work gap – I’m the mother of three boys, and have worked full time for my entire career. In fact, as many of you know my husband is the one who is a stay at home dad. But many of my fellow moms decide to take time off work to care for their kids. They may decide to become stay at home moms, downshift to a more flexible schedule, or change careers. According to the US Department of Labor, about thirty percent of mothers with children under 18 don’t work, and 25% of those that do work are part-time.
All These Gaps Lead to Another
The reality for many women is that they’ll then end up with:
The savings gap – This is where women retire with two thirds the money of men.
The pay gap combines with the work gap to conspire against developing a large retirement account balance. Women who work part-time may not have access to a retirement plan at all. If they’ve left the work force for some time, they may have an old account languishing years. And once they return to full-time work, they’ll need to contribute at higher rate than their male colleagues in order to catch up. All these factors work together to work against having a larger sum of money available for retirement.
What Can We Do About It?
A multi-faceted problem requires a multi-faceted solution. First and foremost, we need to focus on controlling what we can, to make a difference not only for ourselves but for all the women who will come after us. You can refuse to settle for less than you’re worth. You can take charge of your investments – and financial future. And you can work toward achieving your goals and dreams.
Get paid what we’re worth. Don’t settle for less. Tune up your negotiation skills and discuss your salary in an impartial way. We all deserve to be paid what we’re worth. Do your research on what pay would be fair for your job, location, and performance; come prepared to the salary discussion with facts; and if at first you don’t succeed try, try again.
Taking time for family doesn’t need to wreck your retirement. Maybe you’ve downshifted, gone part time, or taken time off. Don’t let that wreck your your retirement. Instead, take stock of your options – and take action. If your employer doesn’t offer a retirement plan, sign up for an IRA outside of work. Even if you’re not working, you can open a spouse IRA using your spouse’s income to make contributions. If you’re returning to full time work after some time away, be sure to up your retirement contribution to help make up for when you couldn’t contribute quite as much. Remember that the person that cares the most about your financial future is you. So take care of yourself.
Be a woman with a plan. Long time readers know that I’m big on knowing your goals and dreams to ultimately reach your definition of financial freedom. I’ve thrown down the gauntlet to challenge you to achieve your Big, Hairy, Audacious Goals (BHAG). Once you know what you ultimately want, you can develop a plan to get there. Ellevest has a tool – tailored for women’s unique situations – specifically designed to provide you a personalized investment plan. Best part? It’s absolutely free to use! All you need to do is head on over to this page, answer a few questions, and in about ten minutes you’ll have a plan tailored to your specific goals and dreams. Be sure to stop by and check it out!
Why I’m Excited
I’ve kept an eye on Ellevest ever since they were founded. As you all know, I’m a personal finance and investing nerd first and foremost. I’m also a technology nerd, and there are sadly not many women – founded technology firms out there. I’m always on the lookout for new and exciting developments in both the financial and technology industries. This is the first company I’ve seen that focuses specifically on women and their investments in a serious, professional way. Sallie Krawcheck, former Wall Street CEO, industry veteran, co-founder and CEO of Ellevest and describes this way:
“We’re not your dad’s old investing firm — and we’re not a tech-bro startup either. We’re busy waging war to help you close your personal “gender investing gap and take control of your financial future.”
As a woman in corporate IT for over a decade, I’ve interacted with many a “tech-bro startup” in my time. So I love seeing a technology and financial firm created specifically by and for women. It’s just like mixing together two of my loves, and gives me a warm feeling in my heart. I hope you’ll want to help support them on their mission too, and that you’ll check out their free investment plan creator.
I Want to Hear From You!
What are your thoughts on the gender gap in pay, and retirement savings? What are you doing to help change this – either in your own life or for women everywhere? Let me know in the comments!
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I do work, but I did take and hours and pay cut to stay home part time once my son was born. Luckily, I still make about the same as my FT employed husband, so we both contribute pretty equally to our retirement. I can see how easy it is to get detailed once kids come along though; I’m just fortunate enough to have the best of both worlds.
Hi Liz 🙂 the gender pay gap is a thorny problem. I’ve been reading up on the issue and studies show that women who negotiate are seen as less “likeable” while men are not impacted. Women are supposed to be “caring”, “nurturing” and not pushy…. it drives me crazy. So basically women face a social impact when asking for a raise (which is often refused), while men do not. 🤯
I know, isn’t it annoying! It’s the same thing at work generally-What for men is considered to be assertive leadership behavior is considered for women to be jerky or not good. And I can’t tell you how many times at work I’ve been told to smile. No one tells men to smile! I’m not a smiley decoration here, I’m working and I’m probably working on something complex or difficult. Ugh.
Great article! I just wrote a review of Sallie’s book, Own It. Have you read it? It’s worth a look. It was about being a woman in the workforce not investing but I liked it.
I did great it-great book!