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Women Employees Need Retirement and Investing Guidance

401(k) Plans Financial Planning

Key Takeaways

  • American women have only been able to have their own bank accounts and credit cards, without male signatories, since 1974.
  • Women perform more labor (paid and unpaid) than men yet still make 82 cents for every $1 a man makes.
  • Over the course of their lives, women will make 49% less than men, resulting in smaller retirement nest eggs.
  • Compared to men, women are better investors and prioritize supporting their families financially- even though men are still the presumed providers and breadwinners in American society.

Were you aware that U.S. women have not yet had the right to their own money for half a century?

With the passage of the Equal Credit Opportunity Act of 1974, all women regardless of race or marital status were "able" to open a bank account without a male signatory. However 49 years later, "just 36% of women say they are investing in general, versus 63% of men", according to the Ellevest Team; while Yahoo Finance found that, "57% of women are not actively investing. Women cite lack of money as the main factor that is preventing them from investing (33%). Other reasons include a lack of knowledge about how to invest (10%) and a combination of a lack of money and lack of knowledge (14%)". Yet, women investors often outperform their male counterparts by a margin of 0.5% to 1%- this differential may sound minute, but over decades this could amount to tens of thousands of dollars. This was attributed to men "over-trading" 50% more than women; men tend to withdraw or move their investment allocations in down markets- women do not.

In the 21st century, women's wealth makes up a third of U.S. household financial assets and nearly 60% of women are solely responsible for the financial decisions of their household but they have different, more immediate, financial priorities than most men. 30% of surveyed women cited "supporting their families" as their top financial priority, followed by 29% stating it was building an emergency fund, next was "budgeting" with 26%, then growing retirement savings and paying off credit card debt tied at 22%.

Women are interested in, and especially benefit from, access to financial resources and education through their workplace; Fidelity Investments found that since 2019 there was a 19% increase in women reaching out for financial guidance. Being that Gen Z and Millennials are the first generations of American women to be predominantly financially independent (60% according to Yahoo Finance), this is not entirely surprising.

Because even though women make on average 82 cents for every $1 a man makes, women have to spend 20% more on healthcare related costs (excluding maternal care) and 32.5% more on their appearance, annually. The pink tax, a well-documented phenomenon attributed to gender-based price discrimination, "costs women an average of $1,300 annually. If the same amount were invested into a retirement fund each year, that would amount to about $16,000 over 10 years — assuming an annual return of 5% — and nearly $160,000 over a 40-year work life", Jeanne Sun at J.P. Morgan noted in a company blog post. Women have to spend more to be accepted as socially presentable, have their gender specific products marketed at a higher price than men's equivalent products, and perform more unpaid labor yet women will make less than men over their lifetimes.

This is imperative to understand when most American women, at least in the past, spend less of their lives working for a wage in which their taxes pay into Social Security. Women's unpaid domestic labor caring for their families and elderly is not monetarily compensated (if compensated at all) rendering women unable to depend on adequate Social Security payments in their retirements' for this exact reason. All the while, we know that women in heterosexual relationships are increasingly making more or making the same as their husbands- except women's earnings drop or stagnate after they have children; typically women reach their peak earnings at age 44, and men reach their peak earnings at 55. And as we saw recorded over 15 year spans, women made a staggering 49% less than men did on average due to career breaks and the wage gap. Therefore, women have to rely on private retirement investments if they are to remain financially independent throughout their lives.

But it is not all doom and gloom, according to Amanda Umpierrez at 401(k) Specialist Magazine, of the female plan-participants Fidelity Investments surveyed:

- 51% of women who invest in the market maintain their investments even when the market drops, compared to 43% of men.

- Only 52% of women stated they know how to invest for retirement, 59% understand when to take Social Security to receive the highest benefit, and 56% know how to pay for healthcare expenses in retirement.

- 39% of women are stressed they aren't saving enough for retirement, and 29% are stressed about the healthcare costs they'll face in retirement.

All in all, employers need to offer a retirement plan with access to financial advisors to supplement their employees' financial wellness, most especially for women while they are young and still in the workforce.

Happy Financial Wellness Day to Sallie Krawcheck and the Ellevest Team!

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