Americans are living longer than ever and enjoying retirements that make up almost a full quarter of their lives. That means your money will need to last longer as well—a particular challenge for women, who tend to both to retire earlier than men and outlive them, according to government data.
Add in the gender pay gap and career interruptions women are more likely to experience, and many women face a serious potential shortfall in savings. Here are some ways women can rethink their financial and investing plans to get ahead of the game.
The gender wage gap may be closing, but median earnings for women working full time are still less than 80% of what men make. What’s more, women are less likely to work full time their whole careers, and therefore can miss out on opportunities to advance their careers and increase their income—which is why their retirement savings can fall short.
But once the kids are independent, the equation can change. “Women in their early and mid-50s often have more time to devote to their careers,” says Kathy Jones, senior vice president at the Schwab Center for Financial Research. “Don’t be afraid to be aggressive at this stage of the game.” Go all in and gun for the promotion: That additional income and retirement savings can be a real boon.
It’s not just that women earn less; only 45% of working women participate in retirement plans, which means that many women have less saved and invested over time.
Of course, smaller paychecks make it harder to save (and part-time jobs typically don’t come with retirement benefits). But keeping a flexible work schedule for a few years shouldn’t mean taking a break from saving for your retirement, Kathy says. Spouses need to plan like a team.
Even if a woman earns no income for a period of time, her spouse can contribute to a spousal IRA on her behalf. Once she resumes working, a couple can keep their spending steady, socking away as much as possible of that second paycheck.
Though women are generally younger than their spouses and may have fewer years of full-time work under their belt, 60% of female pre-retirees say their decision about when to retire will be influenced by the timing of their spouse’s retirement. But a few more years of work (and fewer years of tapping savings) could give a woman’s nest egg an extra boost.
In fact, postponing retirement for four years, from age 66 to age 70, could increase her monthly retirement income by nearly $1,170.
The longer someone puts off collecting Social Security, the bigger the monthly payout. For people who retire today at age 62 the maximum benefit is $2,025, while it’s $2,663 for those who are 66 (full retirement age if you were born between 1943 and 1954). And people who waited until 70, when benefits are capped, receive up to $3,501.
Yet the average retirement age for women is 62. If working longer isn’t an option, a woman may be able to claim spousal benefits and get up to 50% of her spouse’s benefit (possibly even if she’s divorced or widowed). Consult a professional, as spousal benefits are complicated—but they could increase a woman’s monthly income.
At 65, women have almost 22 more years to look forward to, and 30% of them can expect to see 90. Odds are in their favor, too, that they’ll outlive their husbands. In fact, 76% of women 85 and older are widows.
As a result, most women won’t have someone to help care for them if they develop a chronic disability. Indeed, 43% of women age 85 and older live alone. “Women are much more likely to need long-term care as they age,” Jones adds. “Long-term care insurance can provide a critical safety net.”
Almost half of women investors report being somewhat or very conservative in terms of their risk tolerance, compared with men, who report being less conservative, according to several recent studies.
But with longer life spans, women can afford to be a little more aggressive with their investments. And with inflation steadily eating away at investors’ purchasing power, it’s critical to keep at least some money invested in equities, which have a proven track record of long-term growth. “I would argue that you need at least some exposure to equities even into your 70s,” Jones says.
Set an appointment with a Schwab Financial Consultant near you to take a holistic look at your finances. And if you're half of a couple, make sure your other half comes along.