By Kristi De Rycke, Registered Assistant
This is a topic that I have been reading a lot about lately. It really has been a gut check as many important people in my life are women. It is a known fact that there is an income gap. Overall women make roughly 80 cents for every dollar that men earn. The good news is that per www.money.com, the gap is closer to 90 cents for millennials. The bad news is that it is not predicted to be equal until 2119. (1) This is too late for all of us.
What can we do to make sure our retirement is secure even with the wage gap? We can save more and we are. According to a Fidelity survey, women save an annual of 9 % of their paycheck compared to 8.6% of men in workplace retirement accounts like 401Ks. Women also save an average of 12.4 % to their IRA’s/brokerage accounts total balance vs. men that add only 11.6%. (2)
It is great that we save more since there is a wage gap, but what do we do with that money. Per www.money.com, women keep a full 71% of savings in cash compared to men at 60%. (1) Unfortunately the cash does not grow for the future so it may buy less when we retire thanks to inflation. If this surprises you, you are not alone. Nearly half of women did not even know about the investment gap per a published Elle vest 2018 Money Census reported in this same article. Full disclosure: neither did this woman until recently. How much difference can the 11% result in? Per the site $200,000 to $750,000. That is a lot!
There are many reasons why women choose to sit in cash. Somehow many of us think that men are better at math and investing than women. This is truly less than helpful. Many women are single before and during retirement. Many women are widowed during this time. When women outlive their husbands, they are thrown into a situation of needing to be responsible for their finances at a time it is most difficult to do so. Not only is thinking we aren’t as good at investing as men, not helpful. It simply isn’t true! Fidelity completed a survey in 2016 of 8 million retail customers (2) and they found that women outperformed the men by 0.4% when they did invest their money!!! Some of the reasons are that women don’t trade as much and are more focused meeting their goals than outperforming the market. Does 0.4 really make a difference? Per the Fidelity article cited below, the hypothetical .4% higher return can add $35,000 to your overall nest egg if you are 50 and $276,000 if you are age 22. It is a big deal!
It truly doesn’t matter who is better at investing men or women. I honestly don’t care. The point of this article is that women have the capabilities to invest for their futures!
How do we learn how to invest? Women report that parents remain a top source of financial advice but only 20 percent said they were prepared to manage their finances as adults. (2) Only 9% said their education through high school left them well prepared and only 10% that had formal college education. (2) Don’t expect to get your investment information from a woman’s magazine. Per U.S. News and World Report, 17 top women’s magazines were reviewed in 2018. There were 1594 pages of editorial content but only 5 pages of that covered personal finances. (3)
Where do we gain the knowledge to deal with our financial future? Teaming yourself with a financial advisor can help you be sure to remain on track and they can provide resources. There are many free books/audiobooks at the libraries. There are numerous podcasts and blogs on our website as well as across the internet. You can arm yourself with knowledge, but don’t hesitate to ask for help in areas where you feel less confident. We can help!
- There’s an Investing Gap that Costs Women Up to $1 Million. Here’s How to Fix It. Money.com. Sallie Krawcheck February 12, 2018.
- Who’s the Better Investor: Men or Women? 5/18/17. Fidelity Investments Survey Reveals Only Nine Percent of Women Think They Make Better Investors than Men, Despite Growing Evidence to the Contrary. fidelity.com.
- Women Can Close the Gender Wealth Gap by Investing. Women are paid less than men but earn more when they invest. The problem is women invest less than man. Coryanne Hicks. Jan 7, 2019. usnews.co
By Greg Johnson
Women are always right! A lesson I learned a long time ago. In my years of helping families and individuals manage their finances I would agree with everything that Kristi identified above. Typically, women are more cautious in their investment practices and more focused on the end goal instead of the rate of return. Doesn’t mean they are right or wrong, but that patience helps them achieve more over the long run. I find that educating them on their options really does matter and helping them understand how investments work gives them more confidence to invest. If you are struggling in understanding how things work, you need to ask for help. I have said it before and will say it again, if my toilet is broke, I could try to fix it myself, but I would rather call a plumber. You should do the same thing with your investment portfolio. Hire or consult with someone who deals with it every day and ask them for the guidance you need to reach your goals.