Why Women Have a Tougher Road to Retirement

When it comes to saving and investing, women have a few obstacles working against them:

·         Women “work” less over their lifetime because they’re more apt to take off work to                care for a child or elderly parent.

·         Women still make less money than men. The wage gap has narrowed some, however;           according to the Bureau of Labor Statistics women make 81% of their male                                 counterpart’s salary.

·         Statistically, women live longer so they need to plan for a longer retirement and higher            healthcare expenses.

To summarize, women need to save more money with less pay.
How do we overcome this challenge?

1.      Get busy saving for the long term. This is going to take a master budget! Try to save as much as possible in your early years before child-care expenses start. As well as later, in your 50’s before retirement or elder-care starts. By the time you retire, you’ll be happy you were a disciplined saver and can now afford to retire living in the same lifestyle you’re accustomed to.

2.      Become less risk averse. Numerous studies have shown women are less aggressive than men when investing. Theories range from women having less disposable income so they’re likely to be more cautious with their money, to women having a natural protective instinct that makes them less risky. We need to look at the bigger picture which encompasses our future, and that future is dependent upon how we invest. A well-diversified portfolio – a mixture of stocks and bonds – is designed to give you 80% of the upside and only 50% of the downside of the market, per Harry Markowitz, the Nobel prize winner for his theory on Asset Allocation. Over the long term, this theory has served investors well. So, go ahead and set up automatic investing in a well-diversified aggressive portfolio early in life. You’re not going to be living off this money for another 20-30 years, so don’t let the volatility scare you. Just know that your money is working hard for you.

3.      Lastly, women need to be educated to avoid slipping into low-wage jobs that lack decent pay and paid time off. Indianapolis is making some major headlines lately in how it’s supporting women in the workforce. According to a recent study released by Smartasset, Indianapolis is actually one of only three cities in the nation with a gender pay gap in the technology sector that is skewed in favor of women. How cool is that!

-          Written by Gail Gill, CFP® Worley Erhart-Graves Financial Advisors