Does Gender Affect Your Retirement Savings?

June 21, 2016

Connect Member

Personal financial trainer helping women business owners gain control of their finances.

It’s not always something we consider in the earlier years of our careers, but saving for retirement isn’t something you want to keep putting off. Recently, I've seen some articles that discuss how Americans aren't saving enough for retirement, and women in particular are feeling the pressure. Let’s look at some of the reasons for that and how we can take steps to improve the situation.

I found a few longitudinal studies that followed women and men through different parts of their lives and careers. One study that caught my attention followed Harvard MBA graduates to show how and why the burden of student loans weighs heavier on women. Two students — a male and a female graduate from Harvard Business School — go to their first professional entry-level job, and the woman doesn't manage to negotiate quite as high a salary as the man.

There are a lot of reasons for that. Women are not often encouraged to hone the same negotiation skills as men; in our youth we are encouraged to be nice and polite, no matter the circumstances. In many ways, women are taught to be people-pleasers, starting from a very young age. Boys are more likely to be encouraged to go after what they want and be focused, driven, assertive, and aggressive; whereas girls are expected to be cute and sweet and not too aggressive or forward. There’s definitely a problem if even these elite women from the Harvard MBA program aren't managing to negotiate quite as high a salary as the men.

Where the study really started to show a difference between a man’s and a woman's ability to pay off their student loans was at the five-year mark. By this point, men's salaries were much higher than women's, possibly because women were taking time off for having children, getting flexible work schedules, or taking different jobs with less demanding hours.

Sheryl Sandberg encourages women to lean in during these childbearing years, but not everyone can lean in. I get frustrated that it's all on the woman to negotiate correctly, know her own worth and what her salary should be, and be aggressive, because sometimes we run into situations outside of our control. Whether it’s a difficult pregnancy or a family member who suddenly needs a caregiver, a personal crisis can cost a lot of work time and salary, plus contributions to your 401(k), and the possibility of promotions.  

Those are just a few of the reasons women fall so far behind men in retirement savings, but what can we do about it when many of the problems are rooted in societal norms?  

It’s time to reevaluate the power of your money, because your financial decisions can affect more than just your retirement security. We can put our retirement investments into companies that have female CEOs and that practice gender parity in their hiring and paying practices. I think for ages, women have felt unheard by the financial services industry, but now there are a growing number of great platforms and companies that are focusing on women’s needs. For instance, Motif has a No Glass Ceiling motif that invests in companies with female CEOs, which I love. DailyWorth founder Amanda Steinberg is also starting with a partner a new company called WorthFM that will be a savings and investments platform with a low barrier to entry, similar to Betterment, which is also a great way for people to get started investing.

Beyond investments, you can also work to make sure you’re fairly paid. If you are a self-employed woman — a freelancer, a small business owner, an entrepreneur — raise your prices. Go research your competitors, so that you can confidently charge more. If you are working for a company, find out what your male coworkers are making. There are resources for finding out the standard pay for different types of jobs in different areas, like Glassdoor and Monster’s salary calculator tool, but you can also find out by talking to people at your company. Companies aren’t always consciously paying women less, and if you can bring it to their attention, they may be willing to correct the problem.

Taking action now can help you achieve financial security for your own future, and create a better workplace for future generations.

If you’d like to hear the rest of my suggestions and resources for saving for retirement, listen to the full version of my podcast. You can also subscribe to the channel if you’d like to receive weekly financial fluency episodes.

Jennifer Turrell is a member of the DailyWorth Connect program. Read more about the program here.