Why Women Need To Plan for Retirement Differently Than Men

The burden of saving for retirement in the U.S is heavy for most people, but it’s generally more cumbersome for women, who, thanks to a number of factors, have a greater likelihood of running out of money in their golden years. For starters, women, on average, live longer than men. Surely it’s no guarantee, but women need to be prepared to see at least their early 80s, while men’s mortality rate hovers at around 76. 

The need to prepare for a longer life expectancy than men is just one of several ways that women must plan for retirement differently than men. Women also need to factor in the seemingly unending problem of the gender pay gap.

The Gender Pay Gap Adds Up 

Adding to the retirement challenge for women is the earnings and pay gap, said Sandy Higgins, senior wealth advisor at Capstone Financial Advisors.

“There are varied reasons for this gap, but what holds true are the statistics and cumulative impact of this on retirement savings,” she said. “According to the U.S. Census Bureau, women in the United States earn approximately 30% less than men in the 35- to 44-year-old age range. These can be prime earning years in an individual’s career. From the Bureau of Labor, in total, women earn only 82 cents for every dollar a man was paid. While this difference may not seem large to many, over time the results can be substantial.” 

2 Out of 3 Caregivers Are Women

As the pandemic has brutally revealed, women are still far more likely than men to be the caregivers in their family — whether it’s raising kids or tending to an aging parent. According to the CDC, two out of every three caregivers in the U.S is a woman.  

“While not always true, statistics show that women are more apt to leave the job market to either raise a family or care for older family members,” Higgins said. “This can have consequences on not only overall savings, with the loss of salary and employer-sponsored retirement plans, but also missing out on future earnings growth through advancements and promotions.”

How Women Should Plan for Retirement

Given the above factors, it’s clear how important it is for women to make a retirement plan that can see them through their golden years — despite these disadvantages.

Get Confident and Get Educated

It wasn’t until the 1960s that women had the right to open a bank account in their name. And still to this day, men are more commonly identified as the financial providers for their families. Furthermore, men tend to be more financially literate, in part because society allows and encourages it. Women need to be ultra-involved in their own financial lives, and that means brushing up on personal finance education and getting confident. They have every reason to be motivated given that they tend to be more responsible with money.   

“Women are, quite simply, more competent about their finances than they believe, but lack of confidence affects their ability to retire when and how they would like,” said Nicole Keirnes Scanlon, managing director of family wealth management at Olson Wealth Group. “By having less confidence, they are less likely to participate in retirement savings and market opportunities. They are also less likely to create a plan due to their fear of not speaking intelligently about finances or being misunderstood. These missed opportunities can cost thousands in the future. While seeking ways to educate herself is important, just as important is her ability to recognize intelligence that already exists and feel confident to speak to that intelligence.”

Build an Emergency Fund So That You Don’t Dip Into Your 401(K) Too Early

“Not only will dipping into your 401(k) lower your current retirement account balance, but it can also make you lose out on significant compound interest over the years,” said Kristen Carlisle, general manager of Betterment at Work. “I recommend establishing an emergency fund that could support at least three to six months of living expenses to reduce your financial anxiety when facing unexpected life events such as unemployment, critical illness or unexpected caregiving needs — all circumstances that often impact women.”

Have Accounts Listed in Your Own Name

“Maintaining a bank and/or investment account, as well as a credit card in your name provides easy access to funds should you encounter events such as divorce, death or incapacity of a spouse,” said Leslie Thompson, CPA, CFA and chief investment officer at Spectrum Wealth Management. “In the case of divorce, access to your own funds will allow you to hire an attorney and other advisors, as well as fund necessary expenses without delay or judgment. In the cases of death or incapacity of a spouse, lack of title or authority to transact through a power of attorney will likely prevent you from accessing funds when needed. Maintaining accounts in your own name can help carry you through these difficult transition periods.”

Invest More and Invest Now 

“Studies show that women tend to be better investors than men,” said Sandy Yong, aka The Money Master. “As such, they should take the initiative to learn how to invest their money in the stock market and not leave it sitting in cash or a savings account. Women are more level-headed and can stick with a long-term plan as opposed to chasing after hot stocks. This means that they can outperform their male counterparts and have the potential to grow their wealth over time. The earlier women start investing their money, the more time they have to take advantage of compound interest and have money work for them. “

Get Comfortable With Risk 

Unsurprisingly considering the way we’ve been societally programmed, women tend to be more risk averse than men. This can be a huge setback when it comes to one’s financial portfolio. 

“Don’t be too conservative with your investment; if you invest too conservatively you won’t be able to keep up with inflation,” said Catherine Azeles, CFP, investment consultant at Conrad Siegel. “As we all know, the price of goods goes up and we need to make sure that our investment dollars follow suit.” 

Make Yourself No. 1  

Women need to balance how much they save for themselves versus how much they save/spend on their children. 

“It’s no secret that women often put their children’s well-being ahead of themselves,” said Amy Ouellette, Vestwell’s SVP of retirement services. “What does this look like in terms of savings? Women might elect to put money aside for their children’s education before they put money into their retirement accounts. It’s my personal belief that if you want to do right by your children, take care of yourself first. When considering where to allocate funds, remember that there are ways to borrow for education if needed, however the same cannot be done for retirement.”

This same principle goes for caregiving for one’s aging parents, too.  

“As difficult as it may sound, it’s important for parents to live off of their own retirement savings and, if needed, explore public-funded support systems such as Medicare,” Ouellette said. “By doing so, it helps break the cycle of financial strain on the next generation.” 

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