I believe that there is a disconnect between the way financial planning and investment management services have historically been provided to women, and how many women prefer to receive those services. Although all women don’t have the same needs, there are quite a few headwinds that many of us will face over our lifetime. Women are more likely to live longer, invest less, earn less money, and be less involved in the financial planning and investing decisions for their family. As a result, women tend to be less financially prepared for retirement.

So what can women do to ensure their retirement plans are built to navigate around these common financial issues successfully?

Rewriting the Financial Script for Women

Women are often seen, especially in the financial world, as being afraid of taking bold decisions and acting quickly. This is amplified in the investment world, where women make fewer trading transactions and are perceived to take fewer risks. But in truth, women are proven to make better investors than men. And though we may spend more time informing ourselves on financial topics before making big decisions, with this knowledge comes confidence.

Thankfully, there has been more attention in the financial industry and in the media over the past few years that helps to dispel these myths, and address the unique issues facing women in financial planning, investing, and retirement planning. In fact, I started Abeona Wealth in 2020 with the goal of providing better advice to women.

Common Retirement Planning Issues Women Face

Women Earn Less than their Male Counterparts

While I won’t do a deep dive into the reasons for gender income inequality (including discrimination, family responsibilities, occupational segregation, salary negotiations, etc.), it is a reality that has been studied often. The Pew Research Center reported in 2021 that women earned 84% of what men earned in 2020. If separated out by race, the data is much more stark for non-white women.

The pay gap creates lower retirement savings and investments. If a woman is saving the same percentage as a man at a lower salary, a lower dollar amount is contributed and therefore invested and compounded over her working years, creating a sizable difference.

Women Live Longer than Men

Depending on the demographic breakdown, women are expected to outlive men by several years. From a retirement planning perspective, a longer life expectancy simply means that there needs to be more assets to spend later in life. Additionally, women are more likely to need outside help for long-term care expenses if their spouse predeceases them.

Women Have Fewer Years of Earned Income

Women often leave the workforce to care for family and children. On average, women spend 12 more years out of the workforce caring for family than men. We certainly saw this effect on the labor market during the Covid-19 pandemic. Being out of the workforce means less years saving and investing, less opportunity for wage growth, and fewer years contributing to social security.

Women are Less Confident About Personal Finance and Investing

Women self-identify as having less skill and knowledge about financial planning and investing than men, although when measured, the knowledge level between genders is actually quite similar. Interestingly, men self-identify as having more skill and knowledge about these topics than they actually do.

Women seem to be resisting taking control of their financial situation because of a lack of confidence. I have also noticed women holding feelings of shame about this perceived lack of knowledge or past decisions, further contributing to inaction.

Women Start Investing Later than Men

On average, women start investing a couple of years after men do, although the reasons are unclear. The gender wage gap may come into play, with women having less income to save and invest. Additionally men are more likely to talk with friends and colleagues about investing, encouraging one another to get into the arena.

Spending time in the markets is an incredibly important part of building wealth. If an investor contributes $10,000 per year to an investment account and earns 5% per year for 27 years instead of 30 years, she would leave approximately $125,000 on the table!

Women are Less Aggressive Investors than Men

Women are not generally more risk averse nor do they make poorer financial choices. A study by Vanguard shows that women are actually better savers but are less likely to invest in more aggressive holdings that will outpace inflation. The financial industry often labels women as risk averse because they are more likely to hold cash and bonds. However, when women are given a more expansive definition of investment risk and the types of risk, they often make more aggressive investments through calculated risks.

In fact, studies have shown that higher wealth or income increases the willingness to take risks in both genders. It’s fine to risk some money when you know you’ll be alright if you lose out, right? Historically, women just haven’t had this kind of financial security. This difference points to the need for a different approach and more education when working with most women.

How Women Can Improve their Retirement Plan

All women are not the same, and all women won’t face the same challenges financially. But regardless of your personal situation, you can take steps to make sure you are on track to reach your financial goals and have the freedom and flexibility to live the life you want.

1. Know Your Numbers

What do you owe and what you own? What is your cost of living and where does your money go each month? What is your savings rate? Educate yourself thoroughly on your financial situation, and the various financial options available to you.

2. Review Your Investments

You may be surprised to know that women who are higher earners are equally likely to take financial risks as men. Are you taking adequate investment risk to reach your goals and outpace inflation over time?

3.Review Your Insurance (and Your Spouse’s)

How well are you protected in the event of an unexpected death, disability, or long term care need? Though no one likes to even think about these things, yet alone talk about them, preparation and planning are immensely helpful.

4. Have Goals and a Plan

What kind of life do you want to live? What do you need to get there? Having a very clear understanding of your ideal life is fundamental to your financial success. Research has also shown that by simply taking an action in the direction of your goal, your anxiety reduces. When you know what you’re working towards, you can implement all the necessary tools and professional assistance to ensure you reach your goals.

5. Educate Yourself

There is a dearth of good personal finance education in our society, and it is evident across all sections of the population. But when women are equipped with equal financial knowledge to men, they will accept similar – if not greater – risk. Unfortunately, women underestimate their abilities when it comes to finance while men overestimate their abilities!

6. Talk to Your Friends

Talk to your friends about what decisions they’re making, how they’re progressing in their careers, what investments they’re making, and who they trust as an advisor. Here are a couple of good resources to get you started:

7. Find a Financial Partner Who Truly Understands

As a woman business owner and financial advisor, I have unique insight into the retirement planning issues that women face today. I built my firm from the ground up – in the midst of a global pandemic no less! – because I am so passionate about helping women like me take control of their financial lives with confidence.

If you would like to talk in more detail to see how Abeona can help you successfully plan for your retirement, don’t hesitate to get in touch. I hope to create an environment that is approachable to all women, and want all my clients to feel comfortable asking questions and to have agency to make their financial decisions.

I hope that my process, guidance, and discipline will empower women to make good financial decisions aligned with their goals and values.

Mary Meadows Livingston, CFA, CFP® Owner Abeona Wealth

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