July 19, 2022|Kate Salsman, CFP®
When it comes to financial planning, women face unique challenges that often require a more nuanced approach. Case in point: The gender wage gap is unfortunately still alive and well. It’s just one reason why successful retirement and investment planning usually look different for women.
This is all to say that financial well-being isn’t always a straight and narrow path for those who identify as female. One 2021 Ellevest survey uncovered an interesting finding. When asked how they felt about money, most men said confident—most women, on the other hand, said they felt overwhelmed. We’re out to change that.
It’s more than possible for women to flip the narrative and feel financially empowered. It begins with first understanding some of the most common hurdles.
As we hinted at earlier, the gender wage gap is a very real challenge. In 2021, women were paid 22% less on average than men, according to the Economic Policy Institute. Lagging behind in earnings can have a ripple effect that disrupts a woman’s overall financial health—from day-to-day living to retirement planning.
There are ways women can advocate for themselves to help narrow the gender wage gap. This includes negotiating compensation that reflects their worth. Researching competitive salaries in your area can be a great starting point. If a pay increase isn’t feasible, a one-time bonus might be in order if you can make a case for the value you bring to your employer. You might also make a jump to a different company that will compensate you accordingly.
In 2021, a third of women considered downshifting their career or leaving the workforce entirely, according to McKinsey & Co. Caregiving duties, whether they be for children or aging family members, is a biggie. Women report spending twice as much time providing childcare when compared to their male counterparts. Scaling back at work may be the best choice for your family, but it’s important to understand how that will impact your earnings—and your retirement. Pausing your retirement contributions for several years could leave you playing catch-up later on. A spousal IRA could be a good solution. It allows a working spouse to make contributions on behalf of a non-working partner.
Life expectancy is another concern. Women tend to outlive men, which means that most need to plan for a longer retirement. Are you on track to retire comfortably? And will your nest egg be able to sustain you for multiple decades? Living longer generally translates to higher health care costs as well. Women can expect to spend $15,000 more on health care in retirement.
Women’s retirement planning involves a lot of moving parts. Delaying Social Security until you reach your full retirement age is ideal (doing so will increase your monthly benefit). While you can technically begin collecting it at age 62, a reduced benefit could hold back women who are already behind on retirement.
Investing goes hand in hand with retirement planning—it’s the primary way that most folks build their nest egg. It’s also important during retirement. Keeping some portion of your wealth invested in the stock market can help retirees keep pace with inflation. But there’s a very real gender investing gap at play. According to one BNY Mellon survey, there would be an extra $3.22 trillion of assets under management if women invested at the same rate as men. The survey found that only 28% of women feel confident investing their money. Risk aversion is another contributing factor.
Overcoming the gender investing gap is critical to achieving financial independence. This is where a seasoned financial advisor can be so valuable. They can help women leverage investment strategies that support their financial goals, risk tolerance and retirement timeline, which can set the stage for financial empowerment. The right advisor can demystify investing so that women feel confident growing their wealth in this way. It’s a key part of overall financial health.
At Paragon Private Wealth Management, we’re dedicated to leveling the financial playing field for women. Our expert guidance is designed to meet you where you are so that you can thrive today, tomorrow and beyond—no matter your gender. Get in touch with us today to schedule a meeting with an experienced wealth advisor.