- Posted November 4, 2015 by
Santa Monica, California
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Wage Gap Intensifies Retirement Shortfall for Women, Highlights Need to Focus on a Solid Financial Plan
Women, on average, will also spend less time in the workforce, earning less over their lifetime and saving less in retirement accounts and Social Security contributions.
Further, women are more likely to take Social Security early, resulting in lower income for life.
And their life expectancy – which is notably longer than mens’ – is increasing. According to the Social Security Administration, a woman born today can expect to live 86.9 years, versus 83.2 for men.
This perfect storm of factors combined with extreme market volatility makes it even more necessary for women to take control of their finances, says Meagan Phelps, CFP®, of Empress Investment Group in Santa Monica, CA.
She also states, “if women have fewer years in the workforce, then they have less time to make up the money that’s lost during unfavorable market cycles.”
The wage gap alone is responsible for an average $250,000 lifetime earning differential. And women spend 11.5 working-age years outside of the workforce, as they’re more likely to take time off for childcare and caretaking for relatives, spouses, and partners.
“Women have lower lifetime income based on less time in the workforce,” said David Littell, director of retirement income programming at the American College in Bryn Mawr, PA, to Reuters in May 2014. “As a result, they have less in savings, lower Social Security benefits – and they live longer than men. Those things don’t go well together.”
Phelps suggests that women within one to three years of retirement focus on creating distribution, rather than accumulation, strategies for retirement income that focus on efficient taxation and maximization of income.
It’s also important for females to consider working with a financial advisor who can address their unique concerns – and offer education and consulting.
Too often, financial planners continue to focus primarily on the male in the household – the 2014 Couples Retirement Study by Fidelity Investments showed that, when couples interact with an advisor, men are 58 percent more likely than women to be the primary contact. What’s more, 70 percent of women leave their financial advisor within one year of their husband’s death.
Above all, it’s essential to have a plan.
“Picking a couple of mutual funds or one index and weathering the storm hoping to end up ahead 10 or 20 years from now – that’s not a financial plan,” she said. “It does help to align with a financial advisor who is qualified and has experienced the same situations women face in their own lives. With the volatility in the market, it's an opportune time to reevaluate your plan."