When it comes to personal finances, there are many challenges women face that their male counterparts don’t. This shouldn’t be a surprise. Most men and women openly acknowledge it. A survey conducted by Hartford Funds showed that more than half of investors believe that the financial needs of men and women are different. In particular, they said the differing needs focused on the areas of career considerations (60%), long-term care planning (56%), and budgeting (55%).
Facing these additional financial hurdles makes it harder for women to achieve their financial goals. Lower pay can negatively impact their long-term financial stability. Women have longer life expectancies than men. As a result, they often need to stretch their savings even further. This makes the financial stakes higher for women.
In this week’s blog, I'd first like to review some of the financial challenges women face. Then I'll offer some suggestions that may help overcome them.
Before getting to the rest of today’s blog, I would like to wish my lovely wife a “Happy Anniversary.” I can’t begin to say how fortunate I am to have her and the rest of the family we have raised in my life. Saturday was our 27th anniversary.
Please note that I recently created an e-book – “Financial Topics for Women.” If you would like a copy, please send an email to [email protected].
Financial Challenges Women Face
1. The Gender Pay Gap.
The motherhood penalty refers to the career penalty women face after having a child. It can affect wages, the ability to get hired, workplace evaluations, and promotions. Earning less makes it harder to save for retirement.
According to the U.S. Bureau of Labor Statistics, in 2021, a woman’s median earnings were 83.1% of a man’s. This difference gets magnified over a career. According to this article from Time Magazine, a typical woman who works from age 16 to 70 will make $590,000 less than a man who works for an identical period. While many of us begin full-time work well beyond age 16, the disparity balloons later in life. Small, initial differences become larger over time.
What can you do? Start early. Plan carefully. Pay yourself first. Starting early and creating a plan can benefit your chances of long-term success.
2. Longer Life Spans.
The fact that women, on average, live longer than men impacts their financial needs. In a traditional couple, the average woman is younger than her husband. This magnifies the effect a woman’s longer life expectancy has on her financial needs.
Women also often serve as caregivers for the spouses and partners they outlive.
What can you do? Be prepared to fund your own retirement and long-term care. If you are married, decisions about when to start collecting Social Security benefits should take both spouses into consideration. Evaluate whether you need long-term care insurance or if you can be self-insured to help protect yourself.
3. Delaying Retirement Savings.
When it comes to saving for retirement, the sooner you can start saving the better. Unfortunately, many women delay their retirement savings. Lower earnings likely contribute to this delay.
A 2020 Transamerica survey found that only 68% of working women are currently saving for retirement versus 82% of men. Several potential reasons for this difference exist. These reasons include the gender pay gap, maternity leave, and other family-related career interruptions. Their long-term impact can be meaningful.
What can you do? When it comes to contributing to your personal or employer-sponsored retirement account, start saving early. No matter how hard it is, try to take advantage of employer matching to increase your contributions. Pay attention to your spending and savings. Work to increase your retirement savings over the course of your career. For example, consider increasing the percentage of your salary you save for retirement each year. If you get a raise, save part of it.
4. Caregiving Responsibilities.
Women are more likely than men to take time off from their careers or work part-time to care for family members or raise a family. This can materially impact their income-producing capacity.
What can you do? To the extent possible, continue making regular contributions to your retirement savings. If you are married, you may still be able to make a spousal contribution to an Individual Retirement Account.
You can also leverage some of the money your family saves by not paying for a caregiver. Deposit some of that money into an account that can grow over time. Use it to grow your own nest egg.
5. Carrying too Much Credit Card Debt.
No matter the cause, carrying too much debt can hamper your long-term financial health. On an overall basis, men and women have similar credit scores. But the picture looks different if you compare single women to single men. According to 2018 research using Federal Reserve Data, single women, on average have an 18-point lower credit score than single men with similar demographics. Women are also likely to have higher outstanding balances. No matter the cause, try to avoid credit card debt. It represents one of the more costly types of debt you can have.
What can you do? Pay attention to how you use your credit cards. Set a goal of only charging what you can pay off each month. That will help you avoid interest charges. Look for credit cards charging low interest rates. Make sure your credit card has a grace period so you can pay the balance off in full without incurring interest. If you are carrying multiple balances, put a plan in place to help you pay them off.
6. Lack of Financial Confidence.
Studies have shown that, on average, women generate higher investment returns than men. But many women do not invest. Why? They are more conservative and less confident about their financial experience and expertise. Because of this lack of confidence, women can be too risk-averse in their investment-related decisions.
I have hosted two workshops for women in the past to help bridge this gap. I am considering offering this program again in July and will send more information as the date gets closer.
What can you do? Women are saving for a longer retirement. As a result, they should take appropriate levels of risk in their retirement savings. Doing so can lead to higher savings in the long run. You may want to consider working with a financial advisor such as Apprise. A financial advisor can help you assess your risk tolerance and create a portfolio built around your goals and objectives. Please schedule a free call if you would like to discuss your situation in more detail.
When it comes to finances, there are many challenges women face that their male counterparts don't. We hope these suggestions can help you overcome at least some of them.
Having seen the struggles my mother went through before her untimely passing. I want to help keep other women from experiencing what she did. As a result, Apprise works with women anticipating major life changes who want to gain a better understanding of what their financial future might look like.
I do this by taking my knowledge and experience to help them create their “Pathway to an Informed Retirement.” My goal is to increase their confidence that they can successfully transition from saving for retirement to utilizing their retirement assets in a way that can help them maintain their desired lifestyle both now and in the future.
I recently created an e-book – “Financial Topics for Women.” If you would like a copy, please send an email to [email protected]. If you would like to discuss your financial situation and how Apprise can help, please schedule a free call.
I’ll be back next week with “Apprise’s Five Favorite Reads of the Week.”
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of personal finance and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.