When I first started in the 401(k) business and heard someone express the need for a special seminar on women and investing, I balked. Why do we need to talk about saving and investing to women differently than we do to men? As I quickly learned: the need to save for retirement is even more urgent for women because they face several undeniable headwinds.
Gender Pay Gap1
For starters, most people are well aware of the gender pay gap, which currently translates into women earning just 82 cents to every man’s dollar. To put it mildly, improvements in this number over the years have been slow, and at the current rate of progress, estimates are that the gender pay gap will not close until 2093. And this number is for all women: for women of color and older women, the gap is even larger. Lower earnings over a working lifetime mean that women are more likely to have less saved for retirement.
Longer life expectancies.
In addition, the average life expectancy for women is about 81 years compared to 76 years for men.2 That’s five more long years that women have to support themselves in old age when a regular paycheck is no longer coming in. And that’s just based on averages. One-third of women aged 65-years old today who are in excellent health will probably live to age 95—a full three decades past the traditional retirement age.3 So any money that women have saved for retirement needs to stretch further, in some cases much further. In some cases, this forces older women back into the workforce, often at low-paying jobs.
Less time spent working.
Compared to men, women often have less consistent income streams during their working years. As the primary caretaker in most families, women are more likely to interrupt their earning years to care for a loved one—whether a child, a parent, or someone else. Or they may elect to take a part-time job which not only reduces their income but often, too, their access to benefits, including a retirement plan.
Lower participation in workplace savings plans.
Women (and especially women of color) are more likely to work in part-time or other positions that don’t include retirement benefits.4 Even when they have access to a workplace retirement saving program, women are less likely to take full advantage of it. As part of recent study about retirement saving attitudes and behaviors among Millennials and Gen Z, Betterment found that overall, men are simply more engaged than women when it comes to retirement saving.5 Specifically with respect to workplace retirement plans like a 401k:
- Nearly twice as many women aren’t contributing to a retirement plan.
- Of those contributing, significantly more men increased their contributions in the last year—so they’re tending to their accounts.
- More men are maximizing the employer’s match. That means that ⅓ of women who have a match are leaving money on the table.
Women’s Lower Participation In Workplace Savings Plans
Wow. That’s a lot of headwind! And that was even before the pandemic hit.
As a result of COVID-19, women are more likely than their male counterparts to leave their paid positions to take care of school-age kids, which means the workplace is losing ground in terms of gender diversity.6 But the risks for women are even more personal: dropping out of the workforce means losing traction not only as it relates to career advancement, but also as it relates to financial security and building savings. And once again, women of color are impacted disproportionately: The pandemic impacted the very industries in which they are heavily represented, even while Hispanic and Black women are more likely to be single heads of households and the main source of financial support for their families.7
For all these reasons, women should start saving for their future—regardless of their age—before it’s too late. Younger generations can learn from older women: in one study, 41% of women across all races and ethnicities said that their biggest financial regret was not making the effort to invest more.8 Other research shows that women are 14% more likely to feel financially stressed than men and 13% less optimistic about their financial future.9
Women of all ages need to understand these challenges which may not be affecting them now, but likely will in the future. And if they’re already saving, then they (and everyone else!) should help spread the word.
It’s never too soon to start saving for retirement. And Betterment can help. Whether you have your 401(k), IRA or other account with us, we can help you create a plan and determine how much to save, how to invest, and which accounts to use. And our automated tools and strategies will help to keep you on track.