THE STRING: PLANNING FOR RETIREMENT AS A WOMAN: Challenges for Your Retirement Savings That You Probably Haven’t Considered

Being both a woman and a professional at a credit union, understanding how gender affects retirement savings is a natural desire for me. And though the intention of this piece is to build awareness among women, my hope is than men will pay attention, too. For the purposes of this article, let’s imagine that you’re holding a string. This string is a foot long and will represent your retirement savings.

Our journey will begin by briefly addressing the gender pay gap, and its influence over the length of our retirement string. Depending on several factors, such as but not limited to: occupation, race, and education, the pay gap can greatly differ among women. According to the Census Bureau CP Survey of 2018, it is estimated that for every dollar that a man makes, a woman makes around 82 cents. With a roughly 20 percent reduction from every earned paycheck, most women will find it difficult to find the extra cash to build on their nest egg.

The truth is, many women will not factor this probable shortcoming into their retirement savings plan, nor make the necessary adjustments in their approach to overcome it. Since I am a visual learner, we can revisit our string analogy to better understand the gender pay gap and its implications. For most of us, we will need to take our string and cut about 2.2 inches away. And just like that, for many women, only 9.8 inches will remain in their retirement string.

Even though equal pay would be the ideal solution, for the moment our best course of action is to proactively place as much we can into our 401k plans and/or IRAs as soon as we enter the labor force. And if you are employed at a company that offers a 401k match, this is the equivalent of free money that you should always take advantage of. Capitalizing on company matches is a great first step to building your retirement security.

Are you thinking about having a child, or maybe two? For those that already have children, take a moment to consider how much time you took off work. Were you able to contribute to your retirement plan while you were on maternity leave? While you may not instantly recognize this, interruptions in your career limit your overall ability to save for retirement. It can be easy to overlook the potential loss of income, career opportunities, and missed raises associated with family planning. This phenomenon is often called the motherhood penalty.

Many mothers might consider the decision to cut back on hours or switch to a less demanding job. And in both of these circumstances, the result can be a reduction in salary and even a loss of benefits, such as access to a 401k. With this in mind, it is time to glance back at our retirement string once again. If you have a child or plan to have one, you can cut 3.3 more inches away. Why? Well, according to a study from the Center for Retirement Research at Boston College, they found that mothers of one child can earn 28% less than non-mothers over their lifetime and this increases with each additional child. While children are a great source of happiness and fulfillment, they do require a lot of time, attention, and resources. Even now, during this time of uncertainty, a common frustration for working mothers is childcare. As schools and daycares have closed down, working mothers feel that the weight of childcare and homeschooling falls disproportionately on them.

Career interruptions aren’t only associated with motherhood. The responsibility of caring for aging parents and partners frequently comes into play. Whether it’s biology or ingrained social expectations, women are often viewed as nurturers. According to the Family Caregiver Alliance, women spend 50% more of their time providing care than men. The upshot is that many studies indicate women have longer lifespans than men, which can result in extending already scarce assets over a longer timeframe. Living longer may also mean becoming a caregiver for an aging partner, potentially forcing women into early retirement. As such, it seems that the demands of family care and the requirements of building retirement security are often at odds. Are you already a caregiver, or do you see yourself becoming one? How much do you think you will need to trim away from your retirement string because of this?

Retirement security is not a luxury, it is a necessity. As such, it’s important for women to develop a holistic financial plan that addresses their unique retirement challenges. The earlier we start, the better we will position ourselves for success.

At Piedmont Advantage Credit Union, we want to provide the resources women need not only for today’s necessities, but for tomorrow’s security as well. Women who live, work, go to school, or worship in Forsyth County are able to join our credit union and use our many tools to assist with their financial planning. These tools can help to keep your retirement “string” longer and have you more prepared for a happy retirement!


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