Women struggle to make their retirement funds last, according to a recent study from Alliance for Lifetime Income (ALI), an insurance and investment group, that produced a “State of Women 2022” report with HerMoney.com. That’s because their earnings are hamstrung by the persistent wage gap and the burdens of taking on more family responsibilities.
There are ways women can counteract this trend and create more sustainable retirement income, though. The best answer for women and anyone seeking to maximize retirement income is to employ the help of a professional. Contact a local financial advisor as early as possible to optimize your retirement plan.
Why Do Women Struggle to Make Their Retirement Funds Lasting?
Women fall short of making retirement savings last due to several factors:
- The wage gap
- Stagnate earnings
- Loss of earning years
- Longer lifespan
The Wage Gap
Global wealth inequality among women shows that pay is 74% of what men’s pay is. The missing 26% is largely due to a lack of pay equality by companies and a lack of negotiating prowess by women. Women aren’t as likely to ask for more out of fear of rejection. The result is showing up in lower retirement savings.
The job system is traditionally set up in a “work, learn, earn” process. You work in a set field or industry, learn on the job through training acquiring expertise over the years and earn more to reflect those years of applied skills and knowledge.
Unfortunately, it’s common for women to grow stagnate in their earnings either by being passed up for a promotion and/or not advocating for proper wage increases.
Loss of Earning Years
Women, as mentioned, are the primary caregivers 81% of the time for both children and elderly relatives. The common trend from this is missing work, shifting to part-time or ceasing to work altogether. These lost earning years have a compounding effect on the loss of wages and result in thousands in missed retirement savings.
Women tend to live longer than men, meaning they have to spread their savings thinner to accommodate their needs in retirement. While some women will work longer to bridge the gap, it’s no surprise that when given the opportunity most people opt for retiring when they can as opposed to continuing to work.
The blunt way of saying all of this is that being family-oriented, lacking assertiveness in financial negotiations and living longer works against them.
The Best Answer to Achieve Lasting Retirement Savings
The problem is not building the savings but making them last. Alliance for Lifetime Income (ALI) says that while 73% of women know how to build a retirement nest egg, only 47% know how to make it last. The group’s “State of Women 2022” report, produced with HerMoney.com, finds that women who work with a financial professional are “significantly more likely to know the steps to take their money last in retirement” — (58% vs. 39%).
The Bottom Line
Working with a financial advisor has a laundry list of benefits ranging from retirement planning and proper asset allocation. While choosing the right fiduciary advisor for you may seem like a daunting task, we’ve done the heavy lifting. By using SmartAsset’s free financial advisor matching tool, you can be matched up with an advisor that serves your area and who is legally bound to act in your best interest.
Tips for Finding a Financial Advisor
- People who have financial advisors report greater financial security. Research also suggests that working with an advisor can result in additional annual investment returns. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Before you hire a financial advisor, it’s important to understand how much their services will cost. Most advisors charge a percentage of your assets under management, though you may also incur other fees.
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