When it comes to retirement savings, women have been lagging behind men. Just how bad is it? In retirement, women are 80 percent more likely to live in poverty as compared with men, according to AARP.
And, the pandemic has made this disparity even worse.
According to an analysis from Age Wave and Edward Jones, the pandemic drastically altered the retirement plans of approximately 69 million Americans
The report indicates that about 32% of Americans planning to retire will do so later than they originally imagined due to the pandemic. Only about 11% plan to retire sooner due to the crisis.
During the pandemic, women’s confidence in their retirement savings accounts took a nosedive and hasn’t fully recovered. On the other hand, men’s confidence in retirement savings improved.
“This pandemic really hit women very hard,” said Maddy Dychtwald, co-founder of Age Wave. “They have been hit much harder than men. It has had the result that they’ve saved less for retirement — and they have saved less through the pandemic.”
The report shows that 41% of women were able to continue saving for retirement, compared to 58% of men. According to Dychtwald, the retirement savings halt is one factor that is widening the gender income gap. After all, women have historically earned less than men. In turn, women have lower rates of lifetime savings.
As of 2022, the uncontrolled gender pay gap is $0.82 for every $1 men make, notes Payscale. This is the same as in 2021. Compared to men, women make $0.99 for every $1 made by men. This is closer to equality but still falls short.
But, that’s not taking into account how the pandemic impacted women financially.
Why the COVID-19 Pandemic Affected Women Financially
Following the pandemic, millions of women lost their jobs or quit in order to care for their children since schools and daycare centers closed. Nearly 2.9 million jobs have been lost since February 2020; women make up 63.3% of that loss, reports the National Women’s Law Center. In April 2020, the height of the pandemic, 45% of mothers of school-age children were not employed, according to the U.S. Census Bureau.
To put that in perspective, that’s the lowest level of women participating in the workforce since 1987.
Unemployment levels are declining, however, as the economy continues its recovery. In January, more than 1 million men aged 20 and older joined the labor force. Meanwhile, 39,000 women of the same age joined the workforce.
During the first month of 2022, nearly half a million (467,000) new jobs were added to the workforce. However, only 40.3% of these new jobs were filled by women. The National Women’s Law Center estimates that from January 2022 onwards, it would take 10 months for women to regain pre-pandemic levels of employment after men have regained all their labor loss since February 2020.
Even women who have remained in the workforce face difficulties. COVID-19 negatively impacted the career advancement opportunities of more than 60% of women surveyed by the Utah Women & Leadership Project.
And, all of this also doesn’t take into account the fact that women are more likely to take time out of the workforce. Between the ages of 18 and 52, women in the baby boomer generation took eight years off work on average. And, women hold nearly two-thirds of student loans.
How Women Can Boost Their Savings
While this may all sound disparaging, there are ways for women to bolster their savings.
Know your net worth.
In order to determine your net worth, you must subtract any outstanding debts from all your assets. These would include such as credit cards, student loans, mortgages, and auto loans. Taking stock of your net worth will help you determine where to focus your attention next and how to approach your finances.
To get started, you might want to ask yourself the following questions;
- Is your debt high-interest debt, such as a credit card or personal loan? You might want to consider paying it off as soon as possible if that is the case.
- Are you prepared to handle emergencies for three to six months? If the answer is no, then you might want to consider setting up an emergency fund. Putting aside $25 to $50 a month can be a great start.
- What is your monthly savings amount if you are already saving money? Do you think you can set aside an additional 5 or 10 percent each month?
To make sure you’re on the same page with your partner, you should both keep track of your respective and joint assets and debts. To ensure they meet their financial goals, some couples schedule recurring money dates to review spending and savings.
Be more involved with your finances.
The better you understand your finances, the more confident you will be. Review your accounts on a regular basis so that you are aware of your incoming and outgoing funds.
As a debt-relief attorney with Tayne Law Group, Leslie Tayne suggests ensuring you have access to your checking and savings accounts online (or through your bank apps).
“Doing so ensures your money is secure, payments are clearing and bills are being paid,” Tayne told CNBC. “This will also help you familiarize yourself with your spending habits, who your creditors are, and your bank balances.”
Set a reminder through your phone or the app for your bank so that you don’t forget. Consider also using a budgeting app. Ideally, this should let you link your bank accounts, classifies your expenses, and alerts you when expenses exceed your budget.
How about sharing your finances with someone? Keep some control, says Tayne. Don’t be afraid to ask for help if you don’t know where to begin.
“It can be incredibly challenging for women who have devoted their lives exclusively to their home life (and aren’t involved in bill-paying) to know where to start,” Tayne advises.
Keep an eye on your shared bank account, even if your partner manages the bills, and establish credit on your own
Create a financial plan.
401(k) contributions are just one aspect of retirement planning. To figure this out, you need to have a thorough understanding of how much money is being brought in and spent. By identifying these risks, you can implement strategies to avoid them. What’s more, a written financial plan can help you stay on track, while also monitoring your progress.
Don’t know where to begin? The Transamerica Center for Retirement Studies’ CEO and president, Catherine Collinson, recommends learning the basics from books, the internet, and friends and family. “Women may also want to consider seeking the services of a professional financial adviser,” she says.
Additionally, if possible, start saving for retirement as possible. And, again, prioritize an emergency fund. After that, park your money in the right account, such as a tax-free savings account like a TFSA. Also, find a way to pay down your debt along the way. And, without question, set up automatic enrollment for a retirement savings plan.
And, don’t forget to factor in inflation as part of your financial plan, making sure to account for both fixed and variable expenses. A pension or Social Security benefit should cover fixed expenses, such as rent or mortgage. If you know you will have enough money to cover these costs, you will be more relaxed. Keep an eye on your plan annually to ensure that it remains effective.
Be strategic about your earning power.
If you plan to work beyond 65 or take breaks from your career, keeping your skills up-to-date is essential.
By working on a contract basis in the gig economy, you can still continue developing your skills while you aren’t working full time, Collinson said.
It’s also important for women who are working to make sure they are able to take advantage of skills-enhancing benefits. Collinson says this means taking classes to gain professional skills, even if they aren’t studying for a degree.
When negotiating a new position, your should be sure to negotiate your pay. But you should also look at other ways to add value.
“It’s not just about salary,” adds financial advisor Heather Ettinger, founder of Luma Wealth Advisors in Cleveland. “It’s about other perks that may add up over time.”
A female executive looking for a job was advised by Ettinger to include any conferences she wants to attend in the job contract. As a result of attending those events, the executive gained an additional $10,000 to $20,000 in value. She received multiple job offers as a result of the visibility they created for her in the industry.
“It’s knowing what’s negotiable, not to be adversarial, just to get what you’re worth,” Ettinger said.
Get started on your investment journey.
What is the best age for women to start investing? Should it be when you secure your first job? Or, should you wait until you’ve paid down your debt or after a promotion?
There’s no right or wrong answer. But, as the proverb states, “The best time to plant a tree was 20 years ago. The second best time is now.”
In short, the sooner you can start investing, the better you’ll be down the road. Unfortunately, this can be problematic. Studies have shown that women lack investing confidence: only 9% think they’re better investors than men, despite earning consistently higher returns.
If you’re new to investing, you could turn to robo-advisors through apps like Wealthfront and Betterment. Robo-advisors will establish parameters based on your starting point and your goals, in addition to lower entry barriers. And, robo-advisors will optimize your finances automatically.
Also, if you’re overwhelmed you may want to become a member of Ellevest. It’s a financial company for women, started by women. The company can assist you in designing a personalized investment plan and align your investments with your values.
The most important takeaway when starting an investment portfolio? Make sure that it’s diversified. That means you should have a variety of assets including stocks, bonds, mutual funds, exchange-traded funds (ETFs), and real estate. And, if you’re nearing retirement and have maxed out your other contributions, then you may also want to purchase an annuity.
Boost your financial confidence.
Do you feel like your overall financial confidence is lacking? You’re not alone. The good news is that there numerous ways to change this around.
For starters, you can read books to help get your finances in order. Some suggestions would be “Get Good with Money: 10 Simple Steps to Becoming Financially Whole,” by Tiffany Aliche, and “CleverGirl Finance: Learn How Investing Works, Grow Your Money,” by Bola Sokunb. There are also podcasts like “So Money” with Farnoosh Torabi and “Journey to Launch” with Jamila Souffrant.
Outside of those options, you can chat about money with friends or family. Sure, it might be awkward at first. But, you may discover new perspectives and encouragement as a result.
Moreover, several financial institutions offer workshops addressing the financial challenges of women. These include Invest in Yourself: A Financial Workshop for Women and the AAUW Money Smart series.
Take control of your retirement.
About half of women aren’t saving for retirement. If you are among them, you should know that the best way to save for your retirement is to take advantage of your employer’s retirement plan. In many cases, employers offer matching contributions as well. If you can, take advantage of your workplace savings plan. After all, that’s free money you’re leaving on the table.
A 65-year-old woman can expect to live until the age of 86 on average. The average woman will live in retirement for 21 years, almost three years longer than the average male. Due to this, building a nest egg for retirement is extremely important for women.
All these factors and more contribute to the fact that women typically retire later and have fewer assets than men. There is a 43% greater likelihood that women 65 and older will live on a below-poverty income than men. And, even more alarming, women comprise about 65% of the elderly poor.
Start small if you must, but start saving today.
Frequently Asked Questions About Women and Saving Money
1. I have a 401(k) plan at work. What percentage of my salary should I put away for my future?
It is recommended that you save at least 15% of your salary every year. Women, because they tend to live longer than men and may be at greater risk of outliving their assets, should take note of this advice. Despite this, the wage gap may make it difficult to save.
Try to contribute enough to qualify for your employer’s full 401(k) match, even if it’s not possible to contribute 15%. The maximum match is usually 4% or 6% of your pay
2. How can I become knowledgeable and comfortable about investing?
It can be empowering to talk about money with friends. Speaking is the first step toward action. A book club or money circle discussion group might get the conversation started.
Alternatively, you can create an online watch list for stocks. With this, you can keep a weekly eye on the performance of the stocks you have chosen for free.
3. What can women do to ensure they have sufficient retirement savings?
If possible, front load your retirement contributions in your 20s or 30s before you have large expenses, such as a mortgage or children. Roth IRAs allow you to invest tax-free by allocating money toward retirement after taxes have been paid. The income requirement for a Roth IRA is $140,000 for single filers and $208,000 for married filers.
And, it’s also advised to delay your Social Security benefits until the age of 70. Your benefit increases by 8% every year if you delay taking the benefit beyond your full retirement age.
4. If I marry, should I keep my finances separate from my spouse’s?
It is a difficult question. A joint bank account and a mortgage between you and your spouse are certainly appropriate. Money separation may also cause one partner to feel that the other is untrustworthy.
As a general rule, it’s a good idea to keep your retirement account, a bank account, and at least one credit card, as well as your utility bill, in your own name.
5. Is it financially feasible to be a stay-at-home mom for a while? Would it jeopardize a women’s savings or financial future?
If you and your spouse have planned financially, you may be able to do so. Consider sitting down with an advisor before you take a career break to discuss how the loss of two incomes may impact your family’s finances.
This means you will not be putting money away for retirement through an employer plan during that time. Alternatively, you could have your spouse make a spousal IRA contribution on your behalf.