6 Reasons Women Have Terrible Average Retirement Savings

 In Personal Finance, Retirement

average retirement savings

When you look at their average retirement savings, it’s clear that women have problems properly planning ahead.

While much of the advice about retirement we provide on this site still applies to them, there are also some things women must be aware of, specifically, if they are going to keep up with their male counterparts.

Below are six reasons women don’t do as well. Understand them, and you’ll have an easier time saving as much as they do.

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Women Live Longer But Don’t Earn as Much During That Time

Most of you women out there will outlive your male counterparts by 5 to 10 years. Unfortunately, this won’t translate into greater savings.

On average, women make about 80 cents on the dollar when compared to men. They’ll also spend more on healthcare costs over the course of their lifetimes too.

Other factors can keep women from reaching the same average retirement savings amount too. Choosing motherhood is another good example. Approximately 40% of women will take an extended break from work to raise their children.

This will cost them years of earning potential, but it also holds them back from climbing the corporate ladder. Single mothers will also need to cover the expenses for their child all on their own.

This is why women can’t put off retirement planning. No one should, mind you, but men at least have a little leeway to rebuild their average retirement savings if they fall back a bit.

Women who begin saving in their 20s are in a much better place to take time off during their 30s. Of course, that’s also a crucial decade for putting money aside for retirement.

Average Retirement Savings Costs More Than Ever

We’ve covered the high cost of retirement planning on this site before, which is one of the reasons most Millennials don’t think they’ll ever retire. Due to the reasons we covered above, it should come as no surprise that this problem is especially rough on women.

One of the big reasons for the high costs of retirement planning is inflation. Even if it remains at around 2%, this is going to aggressively strip down any nest egg between now and the time a woman finally decides to retire.

Let’s say you decide to wait 30 years before doing so. A savings of $1,000,000 would only be worth about $530,000, and that’s only if inflation keeps steady at 2%.

As a woman, you’re already at a disadvantage in trying to reach the average retirement savings because you’re not making as much or getting as much time at work. Now you have inflation pushing against your progress too.

Also, if you’re a millennial woman, you’re most likely much more risk-averse than the prior generation. While it’s always good to be cautious, it’s not bad to have ambitious investment goals, especially when you’re young.

The Average for Retirement Savings Has Increased

So not only is retirement planning more expensive than ever before, but it’s also going to require setting aside a larger sum than ever before.

Personally, I recommend you save 20% of your income. This might be a bit more than what you’ve heard in the past, but it factors in modern elements of social security, health care costs, etc.

The need for greater average retirement savings is a challenge for everyone, but women will have a lot more work ahead of them to hit this target. For one thing, those greater health care costs are going to tax their income worse than it does for men.

Of course, as we’ve touched on before, they also don’t make as much as their male coworkers, so that 20% is going to be a lot less than it is for men. This is another reason their average retirement savings falls so far below that of males.

early retirement

The Stock Market Is Not the Option It Once Was

One way you may try to make up for the differences in savings for retirement is by taking your money to the stock market to put it to work for you.

The problem is that the stock market isn’t as healthy as it has been for the previous few decades. In fact, there’s plenty of reason to believe that a coming collapse is on the horizon.

The evidence for this collapse is why I rarely recommend the stock market to my clients anymore. Instead, I steer them away from those types of diminishing returns and instead focus them on dedicated portfolio theory (DPT).

This type of investing relies on bonds. You hold them until they reach maturity, immunizing your portfolio from market swings. As each matures, the collection becomes replenished.

Things Are Especially Tough for Single Women 

If you’re a single woman, retirement planning may be particularly challenging for a number of reasons. Per the 2016 Retirement Confidence Survey, 40% of single women have less than $1,000 in their savings accounts.

That’s a lot more than married women, at 22%, and even single men, at 34%. Some of the reasons for this have to do with the above, but there’s also the fact that these women are most likely shouldering the entire burden of their living expenses.

Single mothers will have a number of costs they need to cover. All of this encumbers their ability to reach higher average retirement savings.

Unrealistic Expectations

One big problem that gets in the way of successful retirement planning for women is that many have erroneous expectations about how much they’ll need to retire.

Most men aim to put aside at least $500,000. Yet, despite the fact that they’ll live longer, women tend to think that $250,000 will be sufficient.

This is an even bigger problem when you factor in the issue of inflation we brought up earlier. Women who don’t have a solid goal for retirement in mind are already setting themselves up to fail before they start having their savings abused by the slow burn of inflation.

There are all kinds of reasons women don’t have the same average retirement savings as men, but the six we listed above are the most prevalent.

If women want the same likelihood of being able to retire on time and comfortably, they’ll need to address these problems in their own lives.
happy retirement

Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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