Three ways to bridge the gender savings gap
The fact that women are often paid less than their male counterparts isn’t a new story, but the growing gender retirement savings gap is big news.
Research shows that fewer women have started saving for retirement than men resulting in a widening gender gap in the financial security of future retirees. And since women can expect to outlive the average male by two years there can be an increased need for higher savings. Luckily, there are plenty of ways to close the gap.
A recent study found that while 65 percent of men have begun actively saving for retirement, only 53 percent of women can say the same.1 Women also report saving nearly $42,000 less than men in the same age range. The gap is further broadened by many women giving up a portion of their prime earning years (25-44) to serve as primary childcare providers, while forfeiting access to an employer-matched retirement plan.
How can women close the gap?
Make employers pay for it
First and foremost, women need to start saving for retirement as soon as possible, but shockingly only 45 percent of employed women participate in their employer’s retirement plan. Women should contribute at least the matched amount to their employer’s retirement savings program and invest in other financial products, like Roth IRAs - a great tool for building long-term wealth.
Take some risks
According to one study, men are more inclined to take bigger investment risks that yield higher returns.2 Many women have a tendency to over-leverage their portfolios with traditionally “safer” investments. While savings accounts generate interest and contribute to your financial health, there’s a broad range of options that can reap greater rewards.
Any woman considering leaving the workforce for a prolonged period should plan ahead and save more money before taking leave instead of trying to make up for lost time later. Self-employment is another option to generate income during this period allowing one to invest in aself-employed 401(k) or a SEP IRA. With current annual IRS contribution limits of $18,000 and $53,000, respectively, these plans are outstanding ways to save for the future.
1“BlackRock Investor Pulse Survey.” Blackrock Investments LLC. July/August 2015. http://www.blackrockinvestorpulse.com/
2 “U.S. Consumer Savings and Debt Report.” SaveUp. March 2013. https://www.saveup.com/blog/study-finds-american-women-need-to-lean-in-financially/