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Women’s Retirement Crisis


Shorter careers and reduced earnings threaten long-term well-being

Big business has taken note of the emergence of a powerhouse consumer demographic – women.  And for good reason.  Women influence over 80% of consumer spending,1 and as caregivers to both parents and children, their spending decisions are multiplied by generations.  In addition, most women (including those that work outside of the home) still manage the family’s social calendar and purchases for snack days, book fairs, baby showers, retirement parties, weddings, engagements, birthdays, and everything else under the sun.  Women are not only deciding where and how household funds will be spent.  They also represent 47% of the workforce2, giving them more buying power than ever before. It’s been said that ‘if the consumer had a sex, it would be female’.3

In an effort to pursue this important purchaser, advertisers are moving away from messages of “shrink it and pink it” to ones of female empowerment.  Unfortunately, the financial services industry remains woefully behind the times.  Instead of setting their sights on the growing swath of savvy female consumers, they’ve focused on trying to stay relevant with a maturing internet savvy consumer.  In doing so, they’ve made a shift in business model from merely providing transactional sales to providing consultants that assist with holistic financial planning.   This evolution is worthy one, but it still leaves women out of the picture.

With the ubiquitous move toward comprehensive planning, the financial plan becomes the center piece of the relationship between client and advisor.  Using savings, spending, and income assumptions, the advisor utilizes software to determine retirement income flows and consequently, recommends an appropriate investment strategy.  Research has time and again demonstrated that the number one reason clients do not meet their investment goals is because they don’t follow a plan and often jump ship mid-ride.  (2008 anyone?) The financial plan serves to lay out a path without focusing on the “noise” of current events but instead focuses on the achievement of clients’ goals. And while the assumptions used for these plans are widely believed to be gender-neutral, the reality is that as of January 2019, 77% of CFP ® Certificants are men4, creating platforms and software that are by default, made for men.  They do not consider the fewer years worked by women or that women live longer than men, putting more distress on their (usually smaller) nest eggs which produces inaccurate retirement projections and faulty investment recommendations.  The absence of gender consideration can permeate critical pieces of advice including a client’s “magic number” for retirement and the timing of social security collection.

When creating retirement projections for female clients, there are specific variables that should be examined and customized.

First, women on average work less years than men.  According to social security statistics, the average woman works a full 6 years less than the average man.  Elder care and child care account for the years out of the workforce.5 Savings goals need to accurately reflect years out of the workforce as well as the discontinuation of employer plan contributions.  Years of unemployment can also be advantageous for tax and investment planning purposes such as Roth IRA conversions.

During their working years, women on average make less money than their male counterparts.  The pay gap shows women earning 82 cents for every dollar a man in a similar job earns.6 Additionally, women are not equally represented in high-earning fields.  Instead, women outnumber men in industries like human resources, education, and social services.7   Earning less money means less left over for saving.  Consequently, budgeting, financing principals, and employer benefit packages should be a part of the financial planning process.

Interestingly, women’s incomes tend to peak at a much younger age than men’s as well.  While men’s earnings tend to increase as they spend more time in the workforce, peaking at retirement age, women peak between the ages of 35-44.8 Because only 27% of management positions and 19% of C-Suite positions are held by women,9 their earning potential often hits the proverbial “glass ceiling”.  Candid discussions should be had between female clients and those they hire to guide them to financial security about realistic earning potential and savings assumptions.

Taken together, what we’re seeing is that over their careers, women are working less years, making less money, peaking earlier, and ultimately retiring with a much smaller nest egg than men.  Unfortunately, the story doesn’t end there. Because they retire with less money, social security income becomes more important and accounts for almost half of unmarried or widowed women’s total income.  When determining a person’s benefit, the social security administration is taking two factors into consideration: number of years worked and earnings.  When the input variables are lower, the payout is inevitably lower.  In fact, the average woman can expect an income that’s 23% lower than a man’s.10

The problem of retiring with less money saved and a smaller social security benefit is exasperated by the fact that women tend to outlive their male counterparts, meaning they need those assets to last them for a longer period of time.  Looking at nursing homes, women make up 66% of residents over the age of 65 and an overwhelming 82% of those over the age of 85.11 In addition, the cost of care typically rises with age and need putting more stress on savings.

The retirement projection assumptions should reflect the above considerations to accurately indicate the necessity of a strategy that women are currently shying away from – investing.  A recent Acorns study showed that in 2017, 46% of female respondents said they feel anxious when thinking about their financial future, yet a massive 57% didn’t invest any money at all that year.12   Taking into account market performance and compounding interest, this could cost them hundreds of thousands of dollars by the time they are ready to retire.  Many women cite a lack of knowledge or confidence as being a deterrent to investing; however, multiple studies have shown that when women do invest, they perform better than men.13 Women tend to be more disciplined investors, sticking with a plan thereby reducing the mistakes and costs associated with over-zealous trading.

Women must not only invest a higher percentage of their assets, they also need to invest a higher percentage of their assets in stocks.  Stocks typically provide a higher rate of return than bonds over a long-term timeframe.  Although women are more conservative investors, with the guidance of a trusted advisor they can create an asset allocation that allows them the opportunity to meet their future financial needs while assuming a comfortable level of risk.

If we know that on average women have a smaller nest egg at retirement, can expect a smaller social security benefit, and those funds must last for a longer period of time, then we need to be maximizing the accumulation period through a proper asset allocation that is created thoughtfully to help women meet their future financial needs.  The company that rises to this challenge will be making big strides for women and implementing progressive change in a stale industry.


  1. https://www.forbes.com/sites/sashagalbraith/2011/03/18/financial-services-the-industry-women-love-to-hate/#7e698bf578a7
  2. https://www.bls.gov/cps/cpsaat03.htm
  3. https://www.forbes.com/sites/bridgetbrennan/2015/01/21/top-10-things-everyone-should-know-about-women-consumers/#533dfab06a8b
  4. https://www.cfp.net/news-events/research-facts-figures/cfp-professional-demographics
  5. https://www.tiaa.org/public/pdf/income_gender.pdf
  6. https://www.ml.com/bulletin/4-gaps-that-can-put-women-at-financial-risk.html
  7. https://blog.dol.gov/2017/03/01/12-stats-about-working-women
  8. https://www.aauw.org/resource/the-simple-truth-about-the-gender-pay-gap/
  9. https://womenintheworkplace.com/#pipeline-data
  10. https://www.ssa.gov/news/press/factsheets/ss-customer/women-ret.pdf
  11. https://assets.aarp.org/rgcenter/il/fs10r_homes.pdf
  12. https://sqy7rm.media.zestyio.com/EqualPayDay.pdf
  13. https://www.fidelity.com/about-fidelity/individual-investing/better-investor-men-or-women

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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