A Woman's Financial Reality

Getting behind the driver’s seat for women may be more important than for men.

Even today, men tend to earn more than women. Last year a survey by Hewitt Associates did a study on savings trends. Based on their findings, they found that women in the survey earned an average of $57,000 annually, compared to $84,000 for men. Since most employees contribute on a percentage basis to their 401(k)’s, the average male employee in the study had the chance to set aside greater amounts of salary into a company retirement plan. And possibly even more startling was that some of the surveyed female employees didn’t defer enough to trigger a company match.

Men rarely put their careers aside to rear children or take care of special needs family members. Although, times are changing, traditionally, women have been bearing the brunt of these responsibilities.

So, if a woman had to depend on the company retirement plan to accumulate retirement savings, the time out of the workplace can be seen as a financial setback. This is even more pronounced when you factor in the time value of money. A male employee may contribute to a 401(k) plan year after year for 20 or 30 years or more, and his contribution levels may increase as his salary increases. If a woman leaves the workplace for a few years (or more), her retirement nest egg still compounds, but the steady salary deferrals to a 401(k) plan cease. When she retires, she may have less of a nest egg than her male counterpart if she just relies on the company retirement plan as her primary retirement savings vehicle.

This is a compelling reason for women to build their own investment portfolios, in addition to participating in employer-sponsored retirement plans.

On average, women live five years longer than men. The Labor Department estimates that almost 90% of women will outlive their husbands and spend a portion of their retirements managing their own finances. This means that both counterparts need to be educated and fully understand the financial big picture.

A woman will face a longer retirement than men. On average, a woman’s retirement may last 20 years or longer. If you were to leave the workforce at age 65, you will need to have a healthy nest egg in addition to Social Security. (If it still exists).

The Hewitt Associates study estimated that women’s retirements will average 22 years, compared to only 19 years for men. Factoring in the projected increases in healthcare costs, it concluded that women need to save 2% more than men annually over 30 years to maintain their standard of living when they retire. If a woman earning $57,000 contributes 4% to her company retirement plan annually over 30 years instead of 2% (that’s $95 more a month), the study estimates that she’ll have an extra $81,000 at her retirement date.

The bottom line is that the best antidote to worrying about the financial future is planning for it. Investing to build wealth apart from work – and working with a qualified financial advisor – is a great move. If you want to invest conservatively, you can find strong investment choices with the potential to outpace inflation. Whether your life is stable or changing, talk to your financial advisor today and learn about the moves you can make for a comfortable financial tomorrow.

Wishing You Wealth in all its Greatest Forms

Alex