Women have a myriad of hindrances to achieving and maintaining earnings parity with men. This in turn impacts their ability to save for retirement at the same pace as their male counterparts. What accounts for these differences? According to the Yale School of Management there are three primary factors.
A big issue is that women take time away from work. They frequently leave the workforce to care for children, and then later to care for aging parents. In sum, this leads to women working about 75% of the years that men work. Time away from work, and away from a full time salary, equates to a reduced ability to contribute to retirement savings.
Next, women, even if they start at the same rate of pay as men, end up earning less. This can be due to fewer promotions, promotions at lower salary points or other factors. The previous point of time away from the work force can in turn lead to fewer opportunities for promotions and pay raises.
The final “big three” factor hurting women’s ability to save for retirement is their generally more cautious investment outlook. Women are often more risk adverse than men and this leads them to invest less aggressively and this may lead in turn to lower returns and thus a smaller nest egg at retirement age.
These factors alone mean that women need to save a factor of 1.8 more than men to reach the same level of retirement savings.
Additionally, once retired, women generally spend more money than men. This is usually because their longer lifetimes allow more risk of disease and illness resulting in greater medical expenditures.
With all of these issues in mind it is important that women plan well for their futures and seek out financial advisors that understand all of the ways that planning for retirement as a woman requires specific thoughtfulness.