The Ugly Truth About Women and Financial Security

As many of us are putting the final touches on festive holiday wish lists, let’s spend a few minutes on a topic that is on top of a less-desirable list: those who are less likely to experience financial security in retirement.

It is the end of 2017, and despite progress made in so many areas women still emerge as the underserved population when it comes to financial security. Today’s women are as likely as men to get a Bachelor’s degree, but their financial security is retirement has not caught up. In fact, a recent report by MassMutual found that women are three times more likely than men to report that they cannot afford to save for retirement. The same study reports that only 20% of women surveyed have $10,000 or more in an emergency savings fund (the same measure for men in the study was 30%).

What puts women at a financial disadvantage?

The first and most obvious reason is that women tend to be the primary caregivers for young children and aging parents. While the work they do is important and very valuable to the society at large, it can have the unfortunate side-effect of pushing women out of the workforce entirely (or imposing a part-time working schedule).

As a result of an interrupted career or having to take part-time assignments, women are typically paid less than men over their lifetimes. Because Social Security benefits are calculated based on the average of the 35 most productive working years of the individual, those lower-income years can drive Social Security benefits down.

However, the problem does not stop at the paycheck. Because women are, on average, paid less, they tend to save less. Those without the benefit of life-long steady employment also miss out on employer-sponsored retirement plans. The lower retirement savings have to last because women tend to live longer than men.

Finally, women tend to be more negatively affected by divorce than men are. Although the psychological and the emotional toll of a separation is heavy on both spouses, women are on average more likely to lose a home, fall into poverty, or report trouble collecting child support.

While the role of any one of those factors may vary depending on your personal circumstances, most women experience more than one of those hits during their lifetimes.

What you can do to improve your odds?

First of all, make an effort to stop neglecting the need for a personal retirement savings account. We have all had personal observations of women in caregiver roles who sometimes prioritize other people’s immediate needs over their own long-term financial well-being. The MassMutual study confirms that by reporting that men in the study were more likely to pay themselves first, while women tended to save “whatever is leftover”.

Action: Set a monthly savings goal of a specific dollar amount that you will contribute to your own savings account.

Next, be sure to work with a financial planner to understand your financial needs in retirement. Many women are downright unprepared by the need to play for a longer life and higher healthcare costs, including the possibility of paying for extended medical care.

Action: Talk to your financial planner about your concerns and worries. Ask him or her about what you can do today to improve your odds for a secure retirement.

Finally, consider looking for an investment advisor who specializes in helping women. While the investment industry gets as bad a rep as certain used-car dealerships, there are many professionals who are genuinely committed to helping women overcome gender-specific financial disadvantages. Robo-advisor platforms that cater to women (like Ellevest) can be an option for some investors, as well.

Action: Partner with a financial professional who understands you needs, or find an automated investment platform that suits you.

Image credit: https://www.kiplinger.com/slideshow/retirement/T047-S001-reasons-women-will-never-retire/images/intro.jpg