A few months ago I posted an article from FINRA’s Alert Investor which laid out the problem of the financial literacy gap between men and women. The good news is that the gap is narrowing for younger generations and that millennial women are reporting more confidence and knowledge in financial matters. Unfortunately, when it comes to saving for retirement, there are still some unique factors that work against women.
I think that, for women to be successful investors in their retirement, they need to recognize that these factors can have a substantial impact on the number of assets they can accumulate over a lifetime. Take a look:
The gender pay gap may have decreased in recent times, but women still earn less than men on average over time. This means that women have to save a higher percentage of their income to acquire an equivalent amount. If she doesn't, she'll be saving less. The result is that the benefits of compounding will be comparatively less and lead to a lower portfolio value for the future.
Fewer Working Years
Women are more likely than men to be responsible for the care of children or other family members. When they take time off to do so the result is fewer years in the workforce and for some, less opportunity for wage growth. What does this mean for retirement? Fewer years of earning income and stagnant wage growth ultimately results in lower overall savings.
Finally, women tend to live longer than men. That means that their retirement will last longer and require more funding than their male counterparts. In many cases, their needs such as healthcare costs will be more expensive as they age. It's essential to identify and plan for the expenses that will come with these additional years.
How to get started? Women can benefit from working with an investment professional. A trusted financial advisor who understands the unique consequences of the gender gap can guide you through the process of making investment decisions. And importantly for your financial plan, your advisor will keep you informed about how the economy and financial markets are affecting your investment portfolio.
Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.