Surviving and thriving in the modern economy is challenging for everyone. Now add in the unique barriers facing women, and the degree of difficulty for financial success is raised even higher.
Consider factors like the gender wage gap, career interruption due to family responsibilities (both children and elderly parents), longevity, and discrimination that leads to underrepresentation in leadership roles. All of those, taken together, have an impact on household finances which can reverberate for decades.
The challenges are significant, but not insurmountable. Some questions that need to be asked:
What are the consequences of the gender pay gap?
This is real and harmful phenomenon, with women earning on average 81 cents for every dollar made by men, according to the Bureau of Labor Statistics. It makes for a median earnings advantage for men of 24% right out of the gate, simply because of gender.
That is the current reality, but to counteract those forces, famed executive Sheryl Sandberg has advocated that women 'Lean In' to their corporate careers and ensure better representation in the upper echelons of power. Research online salary comparison tools, at sites like Glassdoor and Salary.com; tap supportive networks like Chief; and act against bias and discrimination, which is the mandate of the Equal Employment Opportunity Commission.
What effects does this have on retirement saving?
When men have a built-in 'head start,' it spills over into areas like retirement saving: Even if both genders are putting away the same percentage of income, the pay gap translates into a massive retirement-fund differential when compounded over years. Women's average retirement savings lag behind men across every income level, according to data from Vanguard.
One potential strategy is to incorporate this information and act aggressively as a response, saving a higher percentage of income than one's peers. Women also tend to invest very conservatively, often too much so, with a significant percentage of assets in low-yielding cash, according to one Vanguard study. That inhibits potential growth.
How do career interruptions affect financial goals?
Women typically bear the burden of more family responsibilities than male counterparts – both in raising children, and helping elderly parents. In fact most unpaid caregivers are female. Any time out of the workforce – or reduction to part-time instead of full-time -- impacts finances and career tracks, and can make re-entry difficult, especially at more mature ages.
Rather than assuming all such family responsibilities themselves, and sacrificing their own careers in the process, women need others to step up and help carry those burdens.
How will longevity affect my financial plan?
There's good news and bad news here: Women live significantly longer than men on average. A woman at 65 can expect to live over 20 more years, while men might expect only 17.5.
The downside of that, is that a longer retirement comes with more financial needs – covering more years, with presumably more healthcare costs. A longer runway, with fewer financial resources, is a double whammy that requires intensive advance planning.