We all have women in our lives we care deeply about: mothers, daughters, sisters, cousins, work colleagues, and friends. Educating yourself on ways to challenge the economic biases that systematically disadvantage women is a crucial first step towards effecting positive change and creating a more equitable society. When that happens, we all win.
Since we’re all supposed to save a percentage of what we earn for our retirement, what happens if half of the population isn’t earning enough? The National Institute on Retirement Security (NIRS) ran a study where it concluded that women are far more likely than men to face financial hardship in retirement. Even in 2019? Yes, even in the age of raging feminism, grl pwr tattoos, the #MeToo movement, and Ruth Bader Ginsburg memes, we see time and time again how women are disadvantaged in long-term savings opportunities. Now the real question is, what can we do about it?
Women face unique financial challenges. Some of these challenges fall under large economic issues like disproportional earnings and investment potential, penalties for time out of the labor force, and longevity risk. Let's break it down.
While there has been an increase in women entering the workforce over the last 25 years, their lower earnings leave them with few resources to invest and grow their wealth.
In 2018, Bloomberg reported on data released by the Institute for Women's Policy Research (IWPR) that points to the real impact that a gender pay gap has over time. It states, "women’s earnings were just 49 percent of men’s earnings -- or a 51 percent wage gap -- when measured by total earnings over 15 years…” This gap makes it challenging for women to consistently save for their long-term goals without restricting their current lifestyle.
If it hasn’t been wired into your brain yet, the sooner you start saving for retirement, the better. Saving early on allows for the interest on your wealth to gain even more interest. This "interest on interest" concept is known as compounding interest. WHEN you start saving almost always outweighs how much you save. And by not saving early on in your career, you're losing out on the monetary benefits of time.
What if you can’t afford to put money away for retirement early on in your career? What if you're nearing retirement but don't have nearly enough saved? What if not being paid as much as your male peers is what's causing these shortfalls? Naturally, this will have an impact on your retirement contributions and post-retirement lifestyle. That’s why it’s important to break economic and social standards for the wage gap, so that everyone can have an equal opportunity to contribute towards their goals.
Actionable next steps to break the gender wage gap -
Now that women have been making an income independently, there's the question of how to make your money work for you. While the answer is to invest, the majority of women don’t. Because the investment space is still primarily dominated by men, many women feel intimidated by investing. However, women have unique challenges that deserve to be recognized and properly represented. And between you and me, learning the basics of investing isn't all that hard. Based on your level of knowledge and comfort, there's a plethora of strategies you can choose from.
Ultimately, investing allows people to take on risk to achieve goals that otherwise wouldn’t have been in their reach. Women, it’s time to get off the fence and invest.
Tools to help you maximize your investment strategy -
Women often pause their careers temporarily to raise a family or care for aging loved ones without knowing the true repercussions for taking time out of the workforce. The penalties are high - and increasing. In fact, as Bloomberg reported, a 2018 study “found that among women who took off work for just one year, their earnings were 39 percent lower than for women who worked all 15 years." Generally, when time is needed away from the 9-5, it is coupled with an increase in expenses. For example, your aging parent who suffers from dementia and requires assistance with medical and care giving expenses. Or, the crying newborn baby that keeps you up at all hours of the night, only to tack on further expenses towards child care services during the day. Regardless of why you need time away from the workforce, preparation is key.
How to prepare for time away from the workplace -
The life expectancy for women is nearly 5 years higher than men. Because of this, women have to stretch their wealth over a longer period, making it harder for women to maintain their lifestyle in retirement.
Outliving our assets is a fear shared by many. However, the likelihood of this becoming a reality is even more apparent for women. That's why every woman needs to be aware of the advantages and disadvantages of social security and how to best maximize their benefits. In fact, married couples should make provisions for the probability that one of them will outlive the other and inevitably have to spend a portion of their retirement alone. In which case, it’s important to educate yourself on survivor benefits. On an equally morbid note, divorced couples can also utilize their ex-spouse's benefits to help prolong the longevity of their assets in retirement.
Important financial concepts and tools to consider -
Articulate your value in your workplace. Advance your career. Spend less than you earn. Be disciplined with your retirement savings. Introduce a plan. Optimize your social security benefits. Stay informed. This requires an ample amount of time, discipline, and experience. If you don’t have the means or desire to take this on yourself, speak with a financial advisor. She will help you put these concepts into perspective and keep you on track.