Americans as a whole are unprepared for retirement, with 34 percent admitting to zero savings and 35 percent saying that yeah, they’ve saved, but haven’t gotten to $1,000 yet.
Men have bigger account balances, put away more money overall than women and have other resources to draw on, while women have to combat a laundry list of handicaps to make sure they won’t be living on the street and eating cat food when they finally retire.
The sad thing is that women are actually better investors than men, reports Money.
According to a Fidelity Investments survey, female investors outperformed males last year by 0.3 percent, and if that’s not enough, the firm’s research actually found that for the last 10 years they’ve done the same.
Investment tracking app Openfolio backed that up with findings for the last three years—since it began tracking results—that women outperformed men.
Women also take on less risk and don’t trade as often as men, which cuts into men’s returns.
In fact, during the 1990s, Terrance Odean, a professor at Berkeley's Haas School of Business, found that men traded 45 percent more than women. He cited male overconfidence as the cause.
So if women are such great investors, why don’t they have more money saved for retirement? Here are 7 reasons women need to up their game to protect themselves in retirement.
7. They lack confidence.
According to Vanguard, 73 percent of women employees participate in retirement plans, while only 66 percent of men do.
Their dire straits at retirement aren’t due to a lack of effort.
But although women are proactive about participating in retirement savings plans—when they have the opportunity, that is—they often lack confidence about investing and that can make them stick to too-safe investments.
And while safety is, of course, a good thing, that cuts down the returns they can make on their investments.
Reading up on the principles of investing and the rules of retirement plans can lay this problem to rest, enabling them to be more proactive about how, and how much, they save.
6. They have lower salaries to save from.
Men’s average 401(k) balances are more than 50 percent higher than the average for women, according to a 2015 Vanguard study.
It’s that old glass-ceiling effect again, and according to a recent NerdWallet study, to build a comparable retirement fund, the average American woman must invest the equivalent of $1.25 from her wages for every $1 the average man invests.
One way to get a jump on that is to start as early as possible, even if it’s small.
And to get the most bang for the buck, they need to do as much as possible to at least make sure they get 100 percent of any employer matching funds provided in a 401(k) plan.
5. They’re plagued with indecision.
Because many women lack a strong understanding of the more arcane ramifications of finance, they can be plagued with indecision about whether to choose this investment or that, or whether to roll over a 401(k)—or even whether to open a Roth.
And, human nature being what it is, this can result in procrastination, leaving them decisionless about when to increase contributions, how to allocate them, or even when to join a plan.
A determination to take action, coupled with a thorough understanding of the educational materials provided by a retirement plan, can help them make (better) choices instead of postponing them for another day.
4. They have less access to retirement accounts.
Not only are women working for less pay, but because of their proclivity to have children and care for elderly relatives or perhaps finish a degree later in life than they might have chosen, they don’t always have jobs that even offer retirement accounts.
The need for flexibility in the work schedule for caregiving (assuming they can still work while providing care) can restrict them to part-time or lower-paying jobs that offer few, if any, benefits.
And that’s not accounting for all the un- and underemployed people, including in the gig economy, who simply can’t find anything else.
That means they’ll have to be even more proactive and open an IRA, then stretch that income to cover not just regular expenses but retirement savings, too—yet another challenge to meet.
And IRAs aren’t exactly at the top of their list; IRS figures indicate that the average end-of-year fair market values for IRAs were nearly $63,000 more than for women.
3. They live longer.
Women live longer than men, so they have to make their money stretch farther.
And even though Vanguard says women put 7 percent of their salary into retirement savings while men only save 6.8 percent, thanks to the glass ceiling syndrome, that’s just not going to cut it.
According to a report from Yale Insights, while women may keep that longer lifespan (about 2½ years) in mind when planning for retirement, married women probably don’t consider that while they’re likely to outlive their husbands, they probably will do so by considerably more than 2½ years.
The report cites Social Security and LIMRA data indicating that “if a husband and wife retire at the same time (the husband at 65 and the wife 63), after the first spouse passes away, the second spouse is likely to live about eight years.”
However, it adds, “Fifteen percent of the ladies are going to live 20 years or more after their spouse dies.”
And in 2014, according to the Social Security administration, nearly half of elderly unmarried women receiving Social Security relied on those benefits for 90 percent or more of their income.
2. They’ll need more money for health care expenses.
Women not only live longer than men, they usually end up alone—which means that if they need care during ill health, they’ll probably have to hire someone to provide it. (They’re usually the caregivers for spouses who fall ill late in life, but there’s seldom anyone available to provide “free” care to them when they’re the only ones left.)
And that will eat up retirement money faster than anything else.
1. They take time off from the workforce.
The Yale report poses this question: “Let’s say that a man and a woman both graduate from the Yale School of Management, and they each get a great new job (of course they do). They start with the same education, at the same company, at the same pay; their default investment will put them on their way to saving for retirement.”
However, “If the man saves 10 percent of his income, for the woman to have the same amount of savings at the moment of retirement, she literally needs to save 18 percent—a factor of 1.8.”
This is assuming women are starting on an equal financial footing with men—which they’re not.
And, since women do take time off from the workforce to have children or provide care, they’re not only not saving as much as when they’re working, they’re not saving anything.
To reinforce that, bear in mind that recent IRS estimates indicate that on average, men contributed about 22 percent more to individual retirement accounts of all types in 2014 than women.