Women and Retirement Savings – Women Have to Work Harder

Published on November 11, 2014

A report on CNN* recently showed that although women in general put away a larger percentage of their paychecks into a savings plan, they still lag behind men when it comes to the final savings amount. The report cited an analysis by Vanguard of more than a million savers with 401(k) plans which revealed that women are 10 percent more likely to enroll in their workplace savings plan and save a bigger chunk of their paychecks than their male counterparts.

However, in spite of their diligence about saving for retirement, those female savers have an average balance in their retirement plans that are far less than the men. Women’s average retirement savings are $78,000 as opposed to the male average balance of $121,000.

The Gender Wage Gap

Jean Young, a Vanguard senior research analyst, points to the gender wage gap (yes, it is still an issue in the workplace). In general, the men surveyed earned an average of 40 percent more than women. The Vanguard study showed the big disparity in average retirement savings showed up among the highest earners, where more male workers are bringing in the higher incomes.

In addition to the wage gap, other factors in women’s retirement savings shortfall include the fact that on average, women work 12 years less than men do over the course of their careers (Source: AARP Public Policy Institute). This is usually due to taking time off to raise children or care for sick spouses/partners or aging parents.

All that being said, a 401(k) might not be the only retirement plan someone has in place but the study does bring to light very important issues for women—and for all workers:
It’s never too early to start saving for retirement, and it’s crucial to save diligently throughout the course of one’s working life.

Self Direct

One way to build more retirement income is to self-direct your retirement plan and invest in a broader range of investments; by including nontraditional assets in your retirement plan, you could develop a more lucrative retirement portfolio. You may self-direct a Traditional or Roth IRA; if you are a business owner you can open a SIMPLE IRA for you and offer this plan to your employees; and if you are self-employed, you can open a self-directed SEP IRA, solo (k) or individual (k) plan. You may also self-direct a health savings account (HSA).

Opening a self-directed retirement account can’t close that gender wage gap . . . but it can take you further along the road to a more comfortable retirement.