When we talk about women and money, we hear a lot about the gender pay gap and how it affects women in the workplace. But the gender pay gap doesn’t just affect women now. It has consequences that ripple out into the future; the pay gap takes a toll on women and retirement.
Many women’s financial futures are a stake. As a retired woman, you are likely to face a number of financial challenges. The National Institute on Retirement Security found retired women are 80 percent more likely than men to be impoverished.
But what are the issues standing between women and a financially-secure retirement? Is there anything you can do?
Reason 1: Women choose to make less
One of the biggest contributors to the overall gender pay gap is the choice of majors and jobs. Women are less likely to choose lucrative college majors.
Anthony Carnevale, economist at Georgetown University, illustrates the percentage of female degree holders in degree programs:
Carnevale states women who end up with high-paying degrees often choose jobs with lower pay because of lifestyle considerations.
Rochelle Odesser, vice president of Madison Planning Group, points out that many women are the primary caregivers in their families. Research from Princeton University shows daughters are far more likely to care for aging parents than sons.
“This may cause more interrupted time at work [for women],” says Odesser. Women choose lower-paying but flexible careers to fulfill their caregiving roles.
The choice for lower pay also relates to how many women work part-time. According to the Pew Research Center, twice as many women are more likely to work part-time than men. The Department of Labor points out these women often work at jobs that don’t qualify for a retirement plan.
When it comes to women and retirement, lower pay equals less to sock away in retirement.
Reason 2: Women fail to negotiate
Linda C. Babcock, professor of economics at Carnegie Mellon University and author of Women Don’t Ask, looked at several studies that show women are reluctant to negotiate their salaries.
One of the studies found male graduates entering new jobs were eight times more likely to attempt a higher starting salary than females. In some cases, the women didn’t realize their salary was negotiable.
On top of that, our reluctance to talk about salary might further contribute to the pay gap. Women might not even be aware of how much other employees are making, so they might not even think to ask for more. The Institute for Women’s Policy Research found that half of workers claim their workplaces prohibit or discourage salary discussion.
It’s hard to ask for pay parity when you don’t know what the “standard” rate is at your company. Pay transparency could be one way to help close the gender pay gap.
Remember when hacked Sony emails revealed Jennifer Lawrence was paid less than her male counterparts? Part of the reason she was paid less – she didn’t know how much her co-stars were making.
The other part? She didn’t want to negotiate harder and come across as “a brat.”
Negotiating often falls flat for women
Women are starting to ask for more, but they aren’t getting what they ask for. The abstract of a research paper by Warwick Economics states, “Women do ask. However, women do not get.”
Our societal perceptions of women shaped Lawrence’s worry about coming across as a “brat.” Harvard Business Review found women face a higher social cost when they negotiate for themselves. It’s more likely women are perceived negatively when negotiating their pay. Men experience almost no social blowback when they ask for more money.
Worries that coworkers will shut them down and view them negatively keeps many women from asking for more pay.
Reason 3: Women live longer than men
The next piece of this retirement shortfall puzzle is the fact that women live longer than men. Data from the Centers for Disease Control estimates women in the United States will to live to be 81.2 years; men will only live 76.4 years.
The National Women’s Law Center estimates the wage gap costs women $430,480 over the course of a 40-year career. Even though they live longer, women end up with less. No wonder poverty is an issue for a retired woman.
Women who are dependent on a partner for their financial needs potentially face larger shortfalls. If their spouse dies, they have to rely on widow benefits from Social Security. They can only hope their partner saved enough.
If you spend part of your working years out of the workforce, it makes sense to set up a spousal IRA. Manage your budget so that spousal contributions to your IRA can be made – even if you’re not curently working. This can at least help you build your nest egg.
Reason 4: Women don’t invest enough
We know why women face a harder climb when it comes to retirement savings, but are they likely to catch up?
Unfortunately, women fall further behind when it comes to retirement because of the way they invest. The Employee Benefits Research Institute points out that 36 percent of unmarried women and 29 percent of married women think they need to accumulate less than $250,000 for retirement. The majority of men believe they need to save $500,000 or more.
Women who work are 14 percent more likely than men to take part in an employer’s retirement plan, according to Vanguard Research. Unfortunately, that doesn’t translate into bigger account balances. In total, men have balances that are over 50 percent larger than women. Vanguard relates this disparity back to the income gap.
What are women doing with their money?
One of the sore points is the reluctance women have with investing. According to a BlackRock survey, only 22 percent of women consider themselves investors. Only 45 percent of women have investments. Most women (65 percent) say they are more disciplined about saving.
Ronit Rogoszinski, CFP® and financial advisor, Women & Wealth Solutions, points out that women’s investing habits can hold them back. “When women save, they don’t save enough and are overly conservative,” she says.
When your investing style is too conservative, you run the risk of not accumulating enough wealth to meet your retirement goals.
One of the problems is women are less confident about money in general. A Fidelity study found 80 percent of women say they don’t have financial conversations because they find the subject “uncomfortable” or “too personal.”
In the same study, 77 percent of women were comfortable discussing medical issues with a doctor; only 47 percent felt confident talking about money with a financial professional.
Women aren’t confident investors. That could be holding them back from growing their wealth.
There’s hope for your retirement savings
Retirement planning can help women feel more confident about investing. Framing it as growing wealth will help move the needle. When women make growing wealth a priority, according to the BlackRock study, they invest more:
Another confidence-booster? Research from UC Davis indicates that men are often overconfident in their investments, and end up losing in the long run, while women’s investing styles are more profitable.
Kiplinger analyzed multiple surveys indicating women are more thorough researchers. They match their investments to their goals, and remain calmer during market upheavals. As a woman, you can turn that to your investing advantage with the help of indexing and dollar cost averaging.
There’s no reason to get caught up with investing in individual stocks when you have a plan that helps you reach your retirement goals.
Odesser suggests becoming informed and working with a financial professional to boost confidence and figure out what you need to do. “Figure out how much you need and be realistic,” she says. “It can help to work with someone who can provide advice as to how to best manage the investments.”
Rogoszinski, who focuses specifically on retirement planning for women, says “saving consistently and automatically is one of the easiest ways to put money aside regardless of market conditions.”
If your employer offers a contribution match, she recommends working to get the maximum match. That’s more money for you in the long run and can help you close your own personal retirement gap.
It’s possible to find advisors, like Rogoszinski, who focus specifically on the issues that women face during retirement.
There are also robo-advisors, like Ellevest, that focus on the factors that impact women. Ellevest claims that “gender-neutral” investing actually fails women because of the realities of the gender gap. In order to address that, Ellevest looks at your gender-specific salary curve and goal targets.
Women and retirement: it’s time to take charge
No matter your situation, now is the time to take charge of your retirement. Understand the reasons for the gender pay gap. Learn about your own limitations when it comes to investing. Then, do what you can to address the problem. Look for ways to start investing more and taking advantage of the resources you do have.
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