It was late 2008 and I was at Fort Jackson, North Carolina, training to go on my final Navy deployment as part of a land-based Joint Task Force. It was O-dark-thirty on a drizzly morning and we were crammed into a standing room only reconditioned school bus wearing full body armor and headed to the rifle range. We were groggy, gloomy, uncomfortable, and quiet. That’s when I heard Beyonce’s Single Ladies for the very first time. It came out of the Bus Driver’s radio and he instinctively bumped up the volume. It’s not a song that changed my life, but I’ll never forget how it made that bus come alive. Wearing 50 pounds of extra gear and with almost no room to move everyone was suddenly dancing. Even the Commander next to me was bopping and swaying to the beat in his seat. By the time we got to the gun range we were awake!
I can never hear that song without thinking about that moment, and I thought about that song when I was writing this article for the ladies. It isn’t just for the single ones, but that song came to mind anyway.
Women Do Not Save Enough for Retirement
A 2016 study by Aon Corporation shows that while American women participate in their retirement accounts (IRAs, 401(k)s, 403(b)s) as frequently as American men, they do so less vigorously. Women are using their accounts at the same rate as men, but they are saving less when they do. A staggering 83% of American women are not saving enough to meet their retirement needs. It is a problem compounded by the fact women typically need more money in retirement because they tend to live longer.
After reading a summary of this study I read a few articles by people attempting to explain why this phenomenon exists. There were several that seemed plausible, and I suspect it is a combination of reasons that brings about the current retirement savings gap between the sexes. Below is a synopsis of the prevailing opinions on the matter.
Women earn less than men. Whatever the reasons, across the spectrum of American society women earn less money than men. This makes it more difficult for them to save and also impacts their ability to obtain maximum matching contributions from employer-sponsored retirement plans.
Women are more likely to put their children’s needs first. I would add to this that women have a lower threshold when it comes to classifying something as a need for their children. I have spoken to many women whose initial impulse is to forgo saving for their own retirement in order to save for a child’s college education. I once spoke with a woman who could have been comfortably retired, but was instead taking unskilled labor jobs to maintain a 5-bedroom house “just in case” any of her grown (and successful) children ever needed to move back home.
The white knight syndrome. Some women believe they just need to get by until a man comes along who will take care of things for them. I think it is a concept that is less prevalent than it was decades ago, but my sense is that it still persists.
In most families the man takes care of the finances. The theory is that the man is taking care of the finances and the woman trusts him and is therefore not engaged (or, is elsewhere engaged). I read this, but I am skeptical. After a few years in this business I think my married clients are split just about 50-50 as to whether it is the husband or the wife who tends to the family finances. In my own experience Tade and I have shifted the responsibility back and forth several times throughout our marriage. I decided to include it here because it is probably true for at least a few women in my reading audience.
My plea to the women reading this is to not become a part of this under-prepared statistic. Don’t be one of the women who are not saving enough to support themselves in retirement. Do not wait to take action. The relentless rules of humble arithmetic do not care if you are male or female. They work the same for both sexes. The longer you wait the more difficult it becomes to reach your goals. Take action now.
A 4-point Plan to Get You Started:
1. If your employer sponsors a retirement plan with matching money, use it! If you are not contributing at least enough to get the maximum matching contribution from your employer you are leaving money on the table. If you need to rearrange your budget to free up enough cash to do this, do it now.
2. Learn everything you can about money management, retirement planning, and investing as efficiently as possible. They didn’t teach you about this in school, so you’re going to have to learn it on your own. Read anything you can find by John Bogle. Check out the local Bank On program. Visit America Saves. Even the Consumer Financial Protection Bureau has some good stuff.
3. Make a plan so that you know your objective. The objective is not to save. The objective is to reach your goal of a comfortable, secure retirement. If you don’t know where you are going, how will you know if you’re on the right path to get there?
4. Don’t be afraid to ask for help. Money is both personal and emotional. If we don’t have any we don’t like to talk about it for fear it makes us look foolish. If we do have some we don’t like to talk about it for fear we will look flashy or it will attract moochers. The problem with that mentality is that it leaves us isolated when dealing with issues that are as important as they are complex. Find someone you can trust and share ideas with them. Ask for feedback. Get a second opinion. If you are able to get a financial adviser make sure you are paying for advice from a fee-only, fiduciary financial adviser. If they try to sell you insurance or a fancy investment you don’t understand, run away!