A GENDER GAP YOU CAN DO SOMETHING ABOUT – YOUR FINANCIAL WELLNESS

A company called Financial Finesse has a report out offering more evidence that women continue to lag men in their saving, investment and other financial wellness categories. The good news for women is the gap appears to be closing, and in some areas we have become the standard bearers.

The other good news – and you don’t need a report to tell you this – is that you can and should take control of your own situation and rise above the norms in the report.

The 2015 edition of Financial Finesse’s annual survey, The Gender Gap in Financial Literacy, shows one particularly disturbing trend for women: the lag in the pace of retirement saving at mid-career. Using data from Vanguard and the Employee Benefit Research Institute, Financial Finesse found that the median IRA and workplace retirement plan savings balance for a 45-year-old woman was $43,446. For a 45-year-old man, it was $63,875.

The Financial Finesse report took those numbers, then gauged the additional amount of savings that the median 45-year-old male employee and the median 45-year-old female employee would need to replace 70% of pre-retirement income and pay for estimated medical expenses (long term care not included). It found a 26% disparity: the median male employee saver needed $212,256 to reach that goal, while the median female employee needed $268,404.

One can argue with some of the assumptions, such as the amount of pre-retirement income needed to retire with security, but the evidence relating to the gaps is solid.

NOW Is a Good Time to Act on Your Financial Wellness

This is a good time of year for anyone to take stock of their financial life. Many of you probably had a vague New Year’s Resolution to “get my financial life in order.” We are three months into the year now, and if you haven’t done anything about it, what better time than now? We are enjoying spring weather, so why not do a spring cleaning of your financial house?

The report also noted some gaps in financial literacy, but again there is some good news for women. Just 67% of pre-retiree women responded that they had a general knowledge of investment classes compared to 84% of their male peers. While 78% of men surveyed said that they had an emergency fund, 67% of women did. Just 34% of women were confident about the way their portfolios were allocated, versus 48% of men. (While not citing any hard data, the report writers questioned whether there might be overconfidence among males in this area).

Financial Finesse found some progress in narrowing the financial savings gap. The report found that 4.2% more women had adopted an investment strategy in the 2015 survey compared to the 2012 edition, and 2% more had done a basic retirement savings projection. The report also noted that the percentage of women who said they were on track to meet their retirement savings goal rose 4.2%.

Financial Finesse provides education and counseling programs to more than 2.4 million employees at more than 600 companies and organizations.

The report found that the gap has declined in virtually every category over the years since Financial Finesse started doing it. The largest gap remains with investing and money management, both in terms of the amount invested and confidence in the plans driving investment. The gap is smallest in the areas of acquisition of insurance for family protection and saving for a college for children. There is virtually no gap in the participation rates for estate planning and participation in company retirement plans.

For the complete report, you can go here.

The “key trends” the report cites are all good news for women, namely:

  • Women are becoming more proactive and better prepared for retirement, even though they face the hurdles of lower median pay, lower median savings and longer life expectancies (I’m not sure this last one is a “hurdle”)
  • The investment gap is narrowing as women gain more knowledge and confidence
  • The gaps in all areas narrow with age
  • The gap is smallest when it comes to issue of taking care of and protecting children and family

Where Do You Start?

You can take control of your personal gap and here are several suggestions on where to start on your financial wellness.

Figure out where you are.
Find a financial planner to help you determine two things: where you are and where you need to be. Failing that, at the least start with a simple retirement planning calculator (there are many available online).

Take advantage of employer matches.
If your employer will match a percentage of your retirement plan contributions per paycheck, contribute enough from each paycheck to earn the match maximum.

Ask about automatic escalation.
Some workplace retirement plans have this option through which you can boost your retirement contributions by a percentage each year until you reach the maximum employer match. This is a nice “autopilot” way to promote larger retirement nest eggs.

Ask for a raise.
You never know until you ask.

Cut credit card (and all other) debt.
Reduce it and you give yourself more money to save.      

Make sure your investments are appropriate for your situation.
I approach all investments as an “agnostic.” By that I mean I always question the status quo and want to make sure the investment is appropriate for me or my clients. While I strongly encourage that you seek professional advice and guidance, remember that you are ultimately responsible for your decisions. Different statuses call for different levels of risk.

Securities offered through LPL Financial, Member FINRA/SIPC.  Financial Planning offered through Lifestyle Planning Solutions, a registered investment advisor. Investment advice offered through Stratos Wealth Partners, a registered investment advisor. Botsford Financial Group, Lifestyle Planning Solutions and Stratos Wealth Partners are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

For a list of states in which I am registered to do business, please visit www.botsfordfinancial.com.

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