3 Ways Women Can Close the Retirement Savings Gap

Pension benefits and Social Security may not be enough to maintain your lifestyle throughout a 20- to 30-year-long retirement. Here’s how to increase your retirement income security.

by NEA Member Benefits


Key takeaways

  • Women live longer, on average, meaning their retirement incomes will have to last for more years.
  • Female educators earn about 7% less than males so they may have to save more of their salary.
  • Women are less confident investors than men but often to get better long-term investment returns.

How confident are you about having enough money to retire into a comfortable lifestyle? A 2017 study by the Transamerica Center for Retirement Studies found that nearly half of women (45%) are “not too confident” or “not at all confident,” compared to just 32% of men sharing those sentiments.

Here are three actions women can take to help level the gender playing field, close the retirement savings gap, and feel more confident about the future.

1. Accumulate a larger nest egg to help cover a longer life expectancy

Figures calculated by the Social Security Administration show that, on average, a woman turning age 65 today can expect to live until age 86.7. That’s about two years longer than a man. But if you’re healthy and active, you could live a lot longer than that. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. Use this Life Expectancy calculator to get a rough idea of how long you can expect to live based solely on your gender and date of birth.

The longer you live, the longer your retirement income has to last. Higher healthcare and lifestyle expenses as you age may put further strains on a fixed income stream.

Pension benefits and Social Security may not be enough to maintain your lifestyle throughout a 20- to 40-year-long retirement. To give yourself more flexibility, focus on building up your personal savings nest egg, by contributing to a 403(b) plan and other outside savings and investment plans.

2. Increase the percentage of salary you save to help make up for lower pay

There is still a gender wage gap in America. The numbers vary depending on the industry and how the calculations are done, but there’s no denying that women are paid less than men in most comparable job positions. Even in a female-dominated segment like elementary and middle school teachers, women earn about seven percent less than men, according to a 2017 study by the University of North Carolina at Chapel Hill. So even though women tend to contribute about the same percentage of wages to savings plans as men (or even slightly more), their lower overall salaries may put them at a disadvantage based on actual dollars saved.

In addition to the equal pay issue, women are more likely to work part time or have pay gaps due to family care giving responsibilities that may require them to take off from work. This “need to nurture” may cause women to think of the money they’ve saved as a family resource, rather than something for personal financial security in retirement. It can also reduce pension and retirement benefits due to fewer cumulative years in the workforce.

To help make up for lower salaries, women should consider putting a greater percentage of their earnings into personal savings plans such as a 403(b) plan. And while helping family members is always noble, try to keep your own retirement savings separate from money budgeted for family needs.

3. Build your investing confidence

Women tend to be less confident than men when it comes to managing investments, according to a new study by Merrill Lynch and Age Wave. Fifty-two percent of women in the study were confident investors while over two-thirds of men were confident in their investment abilities.

The confidence deficit is even more pronounced among millennials, with 63% of women ages 18-29 reporting that financial planning is too difficult to even contemplate.

Funny thing is, women may be better investors than men. A 2016 study by Fidelity Investments found than women earned 0.4% higher returns than men. This may not sound like much, but over many years, it can make a big difference in the value of an account.

There are two big reasons for this performance advantage:

  • Age-appropriate diversification—Women are less likely than men to have their savings fully invested in stocks, and more likely to be invested in a well-diversified portfolio suitable for their age and long-term goals. This means a portfolio that is generally less risky than a more speculative, all-stock portfolio.
  • Patience—Women don’t trade nearly as often as men, preferring a more patient approach. As superstar investor Warren Buffet has demonstrated, buy and hold can be a very successful investment strategy over the long term.

If you feel like you’re lacking the confidence necessary to make your own investment decisions, take the time to actively educate yourself on investing basics and risk management strategies. The more you know, the easier it will be for you to balance your risk and return goals.

Working with a professional advisor may also help your confidence level. An objective, fee-only financial advisor can help you design a diversified investment portfolio appropriate for your long-term needs.

Financial security is up to you

When it comes to saving, investing and financial planning, women may face some disadvantages, such as lower pay and confidence levels compared to men, but also some advantages, such as longer lifespans and smarter investing instincts. With focused actions, you can increase your retirement income security and boost your overall confidence about the future. 

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