The average woman has less saved for retirement than the average man. As reported by Bank of America, the difference is $63,000 to $99,000. Women are generally expected to save considerably more for their golden years.
Is there a reason for that?
There are several reasons. For example
1. The CDC reports that women have an average life expectancy of 5.4 years longer than men as of 2020. Spending more time on Earth means having to spend more money, especially if expensive medical issues arise. In addition, women are more likely to live longer than their male partners.
2. Gender pay gaps still exist. Across many industries, women still earn less than their male counterparts. The situation is even worse for BIPOC women. In other words, women have to save more from their income than men in order to reach the same retirement savings level. Plus, lower earnings mean lower retirement checks. A person’s retirement benefits are determined by the amount he or she makes, how long he or she works, and the age at which they retire.
3. Family leave is not paid. Often, women have to provide care for both children and aging family members. Often, unpaid caregivers have to take career breaks to keep up with all those demands because they lack a flexible schedule, paid time off, or affordable help. This can limit your career advancement opportunities and limit your earning potential. To make that last career break last, you need to save more of your smaller paychecks and less frequent paychecks.
Cool. Is there anything I can do to compensate?
Paying equal wages for equal work and offering paid leave would go a long way towards closing the pay gap. Nevertheless, since you can’t probably do that on your own (looking at you, Uncle Sam), here are some tips on how to increase your own retirement account balance.
- You need to get your money. Saving and investing more for your future (retired) self comes from earning more. If you deserve a raise, ask for one. A change of job may lead to a bigger raise. (PSSt…the employment market right now may be on your side.) Additionally, think about side gigs and part-time jobs that can help you earn money even if you don’t find full-time work.
- Now is the time to start investing. Compounding returns allow money to grow over time, so the longer it is invested, the more potential growth it has. Your investments make money when you reinvest your earnings. Imagine it like a snowball: as it grows, it gets faster and faster, building speedily over time. Let’s do it.
- We’re matched. Take advantage of any retirement savings assistance your company may offer. You may be able to get a portion of your 401(k) contribution matched by your employer. For every $1 you invest, you’ll get 50 cents, up to 6% of your salary. So if you want to “capture your full company match,” you would need to contribute at least that much. Get that money, honey.
- Automate it. Automating your paycheck transfers to your retirement account will prevent you from watching your money disappear or from missing it in the future. This way, saving more will not be as stressful. Don’t have a 401(k)? Not a problem. Anyone who earns income can set up automatic transfers to an Individual Retirement Account (IRA).
The Money Skim
The gender wealth gap has one major consequence: women tend to be less prepared for retirement than their male counterparts. On top of that, women tend to require more retirement savings as they live longer. In the US, national paid leave should be enacted – and the wage gap should be eliminated. While we wait for this to happen, it’s essential to have a plan for saving more.