Saving for retirement is not easy for anyone. It takes quite a bit of planning, and more often than not, some professional help. For women, saving for retirement can be even more difficult.
A recent report from the National Institute for Retirement Security (NIRS) found that women are at a disadvantage with their retirement savings. This is due to ongoing income inequality in the workforce.
The report found that women aged 65 or older have a median household retirement income of $47,244. This is only 83% of their male counterparts. Males of the same age live in households with a median retirement income of $57,144. This includes Social Security, pensions, investment income, and earnings. Also, the study determined that several factors contribute to the gender income gap in retirement. Some of the factors are wage gaps throughout a woman’s career, divorce, and caregiving responsibilities.
The best thing a woman can do is understand women are at a disadvantage when saving for retirement. They must do something throughout their careers to try to make up for the gap. Good money management and savings habits can both play a significant role in improving women’s financial security during retirement.
“Overall, it’s important to understand that the gender pay gap compounds over a lifetime,” says Catherine Azeles, CFP and investment consultant at Conrad Siegel. “People can think that it’s just a little bit of money now, but that thinking fails to take into account the impact that the pay gap will have over a lifetime.”
How to Overcome the Gap
Azeles says that women need to take a proactive approach to their finances. They should set a budget and establish long-term savings goals early on. Azeles recommends taking part in classes that their employee-sponsored retirement plans might offer.
Additionally, Azeles recommends that women should get mentors early in their careers to guide them professionally and financially. Having a mentor can boost a woman’s confidence levels. This will encourage her to ask for higher salaries and better benefits packages. Higher compensation can help close the gender pay gap earlier in life and increase savings throughout a woman’s lifetime.
Either way, most financial planners like Azeles agree that greater financial literacy gives women the leg up they need to catch up to men on the road to a happy and secure retirement.