Why Women Are 80% More Likely Than Men to Live in Poverty in Retirement

a man and a woman sitting at tables, facing away from each other
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You’ve probably heard of the gender wage gap, but did you know there is also a huge gap between men’s and women’s retirement accounts?

There’s a term for that disparity: the gender investment gap.

Women are making their way to the front of the financial and corporate packs now more than ever. In 2017, the Fortune 500 List had a record number of female CEOs — 32, to be exact. We’ve now seen women coach NFL teams and raise millions for their startups.

So why are women still falling behind on their retirement savings?

What Is the Gender Investment Gap?

Anjali Pradhan, chartered financial analyst (CFA), worked in asset management for big-name banks, including PIMCO and Goldman Sachs. She saw firsthand how the investment world operated, and she concluded it was made for men, by men.

Pradhan said the websites of financial services companies tend to create a “square and boring” user experience. Financial information is presented in charts or graphs that frequently don’t resonate with women. Pradhan has found since then that many women respond better to stories and advice from other women who have invested successfully.  

After Pradhan dropped her big-bank job and moved back home to Canada to reassess her career, she met a woman in her 50s who had money to invest from a settlement — but it was sitting stagnant in her bank account.

“She told me that her adviser was talking down to her,” Pradhan said. “He wasn’t really listening to what she wanted, and because she didn’t have what he considered a large account — less than $200,000 — he was reluctant to be of much help.”

The woman turned to Pradhan, who hesitated at first because she lacked teaching or advising experience. But eventually, she agreed.

“I finally thought, ‘Why am I saying no to her?’” Pradhan said. “This was a desperate need for her, and so I started researching, and I found that there actually was a huge hole in the market when it comes to women and investing.”

She came across this “sobering” statistic: Women are 80% more likely to be in poverty at retirement age than men.

Pradhan decided teaching women how to invest their money would be her next career move.

She founded Dahlia Advisory, a company that teaches women about investing through workshops and webinars.

The Scary Truth About Women and Retirement

To fully understand the gender investment gap, it’s key to note that women live longer than men on average. In 2015, life expectancy in America was 81.2 years for women and 76.3 years for men, according to the Centers for Disease Control and Prevention. A longer life means a longer retirement –– and a need for more money to survive.

Women also face higher health care costs and are more likely to need expensive long-term care, according to “Shortchanged in Retirement: Continuing Challenges to Women’s Financial Future,” a 2016 report by the National Institute on Retirement Security.

Women also have to make up for reduced earnings in their careers. According to the U.S. Census Bureau, women working full time made 80.5% of what their male counterparts earned in 2016, up from 80% in 2014 and 2015. The pay gap is getting smaller, but that’s partly because men are earning less as jobs in male-dominated industries, such as manufacturing and mining, disappear, The Washington Post reports. Women are also increasingly investing in higher education.

Still, women continue to earn less than men — and their retirement accounts show it.

The NIRS report also says that women spend fewer years in the workforce than men, often because they leave their jobs to care for children, spouses or parents. This puts their earnings and savings on hold. As a result, women are one-third more likely than men to say they will need to delay retirement.

Women are forced to play catch-up on saving and investing later in life, which means it takes them longer to save the money they need to survive in retirement. 

What Happens When Women and Men Earn the Same Amount?

Yes, men tend to invest and save more when they earn more than women. But the gap nearly disappears when men and women have similar incomes.

A 2015 Vanguard report found that women who earn less than $100,000 a year have higher median retirement account balances than men earning the same amount. At incomes of $100,000 to $149,999, men’s and women’s median account balances are about even.

Controlled for income, the gender investment gap almost disappears, with the exception being big earners. Among those with annual incomes above $250,000, men have higher median retirement account balances than women. Jean Young, senior research analyst at Vanguard and the author of the report, told The Washington Post that the disparity among those with high-wage jobs could exist because men have held the high-paying positions longer.

But The Washington Post also reported that women are less likely to have access to employer-sponsored plans, because they’re more likely to work in low-paying or part-time jobs that don’t offer retirement benefits.

Here’s Another Factor That Hurts Women’s Balances

According to a 2016 BlackRock survey, only 42% of women say they are confident in their savings and investment choices.

A 2017 Fidelity report found that only 9% of female respondents thought they would outperform men with their investments. But the report revealed that women performed 0.4% better than their male counterparts on average when it came to investing.

Fidelity’s report said one explanation is that women tend to take on less risk. But that doesn’t mean women are averse to financial risk. Instead, it means they allocate their investments appropriately for their age, whereas men often have their entire savings invested, which could represent too much risk and not enough diversification.

Women also tend to plan with purpose and practice patience when it comes to trading.

“Women too often underestimate their strengths as savers and investors,” said Alexandra Taussig, senior vice president of women investors at Fidelity. “It’s time to celebrate our abilities and maximize them by making a commitment to get more involved with our money.”

It also helps that women save more on average than men — around 9% of their paychecks annually, while men only save 8.6%, according to Fidelity.  

How Can Women Catch Up on Saving and Investing?

Women may be behind in their retirement savings and investments now, but that doesn’t mean they have to be forever. Pradhan said there are a few things women of all ages can do to get on track with their retirement savings:

Start now! Even if you feel like you aren’t investing perfectly, do it anyway. “No one really ever has all of the answers, so everyone should get started as early as possible,” Pradhan said. The earlier you get started, the more time you’ll have to make compound interest work for you.

Seek out jobs with 401(k) plans — and take advantage. Many employers match your 401(k) contributions up to a certain percentage. That means you’re basically getting free money, so be sure to max out your contributions to get the biggest benefit.

Find investment advice that works for you. “If you feel like you need help, shop around for an adviser,” Pradhan said. “Particularly one who is on a fee-only basis and not commissioned-based.”

Don’t be afraid to try robo-advisers or new investing products. “It is possible to invest without an adviser these days,” Pradhan said. “With the rise of robo-advisers and other easy-to-use financial products, women can take their financial futures into their own hands, benefiting them greatly in the long run.”

The gender investment gap may not disappear any time in the near future, but where we’re at is a start.

“I think women still need more of a helping hand, but generally, I still feel pretty optimistic about the way things are going in the financial world,” Pradhan said.

“And if things go really well, I’ll be out of a job because women will have totally caught up with men!”, she said with a laugh.

Kelly Anne Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.

This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.