There are significant differences between men and women, especially—and unfortunately—when it comes to money. Many of these differences are not positive for women and require special care and attention to help close the financial gap that is a reality for virtually 50% of the population. Plain and simple: Women face a financial head-wind relative to men.
This financial head-wind occurs on multiple fronts:
Wages: On average, women make 21% less than men (source). This shortfall in income has obvious implications: lower savings rates, lower spending potential, greater difficulty paying for health insurance, and more. The ripple effect from lower wages is equally alarming.
Assets: Lower savings rates leads to lower lifetime wealth. A report by the National Institute on Retirement Security indicated that a 65 year old woman has 34% less in assets relative to a 65 year old man (source).
Retirement Income: This shortfall in wages and wealth leads to less retirement income and lower Social Security benefits. Typically women have 41% less retirement income than men (source).
Health: The lower wages makes it more difficult for women to afford and maintain adequate health insurance and less likely to obtain necessary healthcare. In general, women are less financially secure than men at every stage of life.
Social Constraints: Although there’s been an unmistakable increase in the number of women in the workforce that has contributed to a shift in familial roles, the fact of the matter is that the majority of women still take on the primary responsibility of child rearing and maintaining a household. In addition, caring for aging parents (whether they are hers or his) fall primarily on women. The constraints of time and energy have a direct impact on a women’s career and earnings potential. The impact of parental caregiving on lost wages and social security for women is $274,044, while the impact for men is $233,716 (source).
Divorce: Factor in a divorce rate of almost 50%, which by itself creates financial constraints, and we find more single women approaching retirement in dire financial shape.
Longevity: Ultimately women have the final say, as they live longer than men by an average of more than 4 years (source). This longevity is better than the alternative, but it creates greater strain on their remaining asset base.
This is not to overlook the countless women who earn more than men or serve as primary breadwinners to their family. Even in these situations, women still face greater social constraints and typically work harder than their male counterparts to reach the same level.
It’s critically important to anticipate the above challenges when crafting financial plans for women. Building higher levels of surety into an investment portfolio along with consistent income streams is more important for women than men. They take on risk in other parts of their life and prefer to minimize market risk where possible. In addition, financial plans should be reviewed and stress tested to anticipate health events, the necessity for early retirement, potential disability, long term care illnesses, premature death of a spouse or partner, longevity, and more.
Educating women on the above issues is the first step in empowering them. With empowerment comes the confidence to handle their finances and from this comes the peace of mind of knowing you’ll be financially secure.
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