Women deserve a financially secure retirement, but many face unique challenges that make this easier said than done. Today's older women are offering a guiding hand to
A new report from the Certified Financial Planner Board of Standards (CFP Board), a non-profit organization that provides financial planner certification, shows some of the top financial goals for women are to set themselves up for a comfortable retirement,
According to Fidelity Investments, people need to set aside 10x their income by age 67 to live well in retirement. Yet women are generally behind their male counterparts when it comes to these financial benchmarks: A survey from Prudential found that men between the ages of 55-75 have an average $157,000 put away, while women have just $50,000.
Liz Miller, founder and president of Summit Place Financial Advisors and chair of CFP Board's board of directors, says some of her married female clients who are at retirement age look at their individual savings versus their male spouse and are surprised by the difference.
"Often the female spouse is telling me, 'I didn't realize I was lagging so much. I really should have paid more attention along the way,'" she says.
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The good news is older women are now sharing this newfound knowledge and experience with younger generations, advising them to pay attention from the start, says Miller, noting an uptick in younger generations taking an active role in their financial welfare. According to the CFP report, over two-thirds of women are the primary or equal decision makers for their household's investments, and nearly 30% say they are very confident in managing their own finances.
"Unlike what I hear from some of the mothers who say, 'Wow, I regret how I ended up here,' the 20-somethings I'm talking to are [saying] 'Tell me that I'm on track, tell me what I need to do and help me do this,'" Miller says. "Whether they're married and in a partner situation or they're single, this generation of young women is very involved in their financial decisions and in their investments."
Closing the retirement gender gap
But there's still a lot of work to be done to close the gap. The CFP Board report states that almost half of women are only somewhat sure when it comes to managing their finances, and another 19% wish they had more support. The right benefits and professional guidance can help dispel myths, and prepare women to face challenges and set goals.
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For example, women are more likely than men to say that caregiving expenses are a main financial concern, and are more likely to put their career on pause to raise children, setting back their savings potential. A study from the Columbia University Mailman School of Public Health shows that younger employees who reallocate funds toward caregiving responsibilities face a 40-90% deficit in retirement savings.
"When I'm working with a client, one of the first things I'll ask is, 'Is there anyone else you're taking care of, or is there anyone else you might someday be taking care of?'" Miller says. "It's something we can talk about and plan for. Some of my older clients maybe didn't get that early discussion to plan ahead for those things."
Women who have children often cut back on hours or leave the workforce altogether, significantly diminishing their savings contributions, but the idea that they have to stop saving for retirement isn't true, says Miller. For example, if they have a spouse that's working and has a retirement plan, they can still contribute to an IRA without their own earned income, she explains. If women ease back into any kind of work — consulting, part-time work from home, etc. — this money can go into retirement savings as well.
"If you do anything that generates income, you can easily open some personal retirement accounts that let you put even more in the IRA, [or] you can always put it away in addition to the IRA. A lot of women who have left the traditional workforce aren't given good guidance about [that]."
Another myth Miller wants to correct is that people should only save up to their corporate match. In fact, they should save up to the federal limit — a corporate match is not enough for a comfortable retirement, she says.
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The right advice and resources make a difference
The CFP Board report shows that women appreciate financial advice and support, and that 56% agree financial planners are best able to help them achieve their financial goals. Finding a CFP-certified adviser is important, as they are taught to uphold important efficacy standards and get a wide variety of financial education, including the psychology of financial planning, Miller says. For those who think they can't afford one, she points to pro bono organizations such as the
"A lot of people think they can't afford working with a qualified financial planner or a CFP professional, but if they come to our website, there are many different fee models for where somebody is in life," she says. "There are many different providers who target different categories — young people, next gen people, people who pay on an annual retainer."
Employers can play a valuable role in
"The generations coming up are more confident than ever in managing their own personal finances as well as their investments, so we need to meet them as CFP professionals and financial advisers to help them stay on track," she says. "They're well positioned to meet their goals, but they can't be expected to do it alone."
