Eight percent more of income every working year in fact. TIAA, a Fortune 100 financial services organization, studied the gap in savings needed for men and women and in their Gender Retirement Gap report. They found that from graduation to retirement, for men and women to retire as equally well off as one another, men need to save 10% of their income, while women need to save 18%. Women need to save almost double their male counterparts just to achieve the same level of retirement lifestyle. Why? TIAA highlighted four reasons why women need to save almost twice as much over their working careers:
- Fewer Years in the workforce
It isn’t just taking more time out of the workforce to raise young children than men typically do, it is also taking time out to care for aging parents. Family is a blessing you can’t put a dollar figure on, but these years out of the workforce caring for loved ones does cost us in our ability to save. But we can’t blame it all on family for fewer working years either. Women typically voluntarily leave the workforce to retire earlier than men as well. According to Statistics Canada, the average retirement age for women in 2019 was 63.3, while it was 65.2 for men. The fewer the years you have earning an income, means the fewer the number of years you have to be able to save. That means you need to save more during the years you are working.
- The Wage Gap
In our Mind the Gap… It might cost you blog we discussed this wage gap. The Institute for Women’s Policy Research in the US found that on average, a woman with post-secondary education will miss out on about $800,000 of earnings over the course of her career due to the wage gap. Th US Census Bureau reports that within the general population, women still earn just 78 cents for each dollar men make. It is even worse for professional women who earn just 72 cents for each dollar a male professional earns. Lower incomes means needing to save a higher percentage of income just save the same dollars each year that a man needs to save.
See our Closing the Gap blog for 5 tips to properly prepare and set yourself up for successful income conversations and negotiations.
- Women Take Less Investment Risk
Less risk, less reward. When it comes to investing the reward is having your money working harder for you. The harder your money works for you, the less you have to work for your money. The result of playing it safe can mean that you need to save more to fill the gap between what you earn in a low risk investments versus what you could have earned by taking more risk. Now, it needs to be stated that taking more risk means taking reasonable risk. Gambling is simply foolish (entertainment value, fine, but counting on the lottery win, a fools errand).
Yes, it is true that overall, women invest more in “safe” types of investments like cash, bonds, and GICs and less in investments that typically provide higher long term returns like Stocks and Exchange Traded Funds and Mutual Funds that invest in stocks. However, it should be noted that Fidelity Investments found that when women do invest, they typically make excellent investors and outperform men.
- Women Live Longer
While we typically work fewer years and therefore have fewer years to actually save for our retirements, in the end we need to have more dollars saved because on average, we live longer. We have more years that we need to have money save for. The fastest growing demographic in Canada are centenarians and for every man over the age 100, there are 5 women. We need to be prepared to live and maintain our lifestyle, for a long time.
Having fewer working years during which we earn less than our male counterparts, combined with generally taking less risk and living longer, all result in the need for women to save more than men for retirement. TIAA found that the difference worked out to women needing to save 18% of their income from graduation to retirement compared to just 10% for men. While it can be handy to point to a rule of thumb, I personally have yet to meet anyone who is average. Our circumstances are all unique. The best way to determine how much you need to be saving in order to retire comfortably and remain that way is having a retirement plan that is kept current and progress tracked.