International Women’s Day marks a moment to reflect on progress made and a time for candid discussions around the work that remains when it comes to gender equality.
One area in which there is unquestionably still a considerable divide between men and women is in retirement preparedness. One of the most significant outcomes of the enduring wage gap over time is how it has contributed to creating a persistent retirement savings gap where women continue to lag behind men, regardless of progress.
What’s the difference between a 401(k) and a Roth 401(k)?
Despite the challenges, there are ways for women to take control of their future so that they’re optimally equipped to retire on their own terms.
1. Get offline and live your own life. With 50% of women today saying their purchases can be influenced by FOMO (fear of missing out) perhaps due to social media influences, it’s time to divert attention to living the life you want to lead and being more productive online. Consider diverting an hour or two a week of online attention to building or tracking against a budget, setting up auto-deposits and bill payments, and researching alternate income streams or side gigs. And be fully present with those you care about — live your life instead of observing others, and you may find your life is richer if you invest in experiences, not possessions.
2. Create choice. Author Lewis Carroll once said, “If you don’t know where you’re going, any road will get you there.” Women transition in and out of the workforce with greater frequency than men, which means you need to know where you want to go with regard to retirement and be prepared for income breaks and changes. A couple of ways to get ready are to prioritize building an emergency fund to cover an absence of up to six months or more and to contribute to any employer-sponsored retirement plans up to the employer’s match, if any, at a minimum.
Women also have an opportunity to evaluate and even create options for greater income during market fluctuations by learning when to adjust their saving streams and when to stay the course. For example, the current market volatility may be unnerving but may be an opportunity to buy low, and if you still have years to retirement and your savings plan is sound — don’t panic.
Lastly, take advantage of any so-called catch-up provisions in your plan. For example, in 401(k)s this year, if you are 50 years old, once you’ve saved the maximum ($19,500) you can continue saving an additional $6,500 for a total of $26,000 toward your retirement.
3. Put your air mask on first. It’s important to be collaborative with your financial plans and goals if you are in a relationship, especially since a MassMutual survey found nearly half of married Americans say finances have previously factored into their decision to stay in or advance a relationship and nearly 1 in 4 admit to keeping a financial secret from their significant other. Women should not hesitate to proactively bring up finances with their partner, as one of the best ways to tackle financial opportunities and challenges is to set and align on goals and strategize on how to best achieve them.
At a minimum, women should be knowledgeable about family finances, to build their own credit transparently, and to have options available to them in good times and in bad. Many households divide and conquer on chores, but not on finances. Ignorance is not bliss. It is not reasonable, fair or smart to fully delegate financial management of your family to someone else.
4. Live longer and prosper. By age 85, women outnumber men two to one, which is why they should be much less willing to tap into their retirement funds earlier than full retirement age. In fact, when we looked at women’s retirement plans, we found that nearly half (43%) are unsure of how long their savings will last compared with one-third of men (33%). With women living longer than men, it’s that much more important to maximize the full benefit of a 401(k) plan, IRA or Social Security retirement benefits by not tapping these retirement income sources early. To check yourself, get into the habit of saying, “When I am 85, will I be glad I made this purchase?”
5. Plan for the unexpected. Women are four times as likely to say their significant other covers most of the household expenses. In the event your partner is no longer able to continue covering expenses, it’s critical to be properly informed and equipped to take over. This means preparing for everything from a working knowledge of all income streams and outstanding debt, knowing where important papers and online statements are, and paying bills on time to avoid increased debt and dings in credit scores. Another lesson here is preparing for the unexpected before it happens, and that means considering life and disability income insurance for yourself and your significant other. Many employers offer options in the workplace so be sure to inquire.
6. Switch gears to include long-term thinking. While women and men are equally focused on day-to-day financial planning like viewing checking account balances, and developing or revising budgets, men are more focused on financial habits for the long term, according to our research. While many women are focused on successfully managing their household and family activities on a daily basis, they must also ensure they’re thinking about their future, with or without a partner, so that they have options.
Money is a tool to help you create the life you want for your family and for yourself and you can start taking steps today. At the United Nations, the 2020 theme for International Women’s Day is “I am Generation Equality.” We can’t forget about the other areas (and geographies) where women don’t yet have an equal voice. Some of the action steps the U.N. suggests are to challenge gender norms, celebrate diversity, break stereotypes and — my personal favorite — empower each other. If we lift each other up, we will all have happier lives and careers.
All statistics cited are based on research commissioned by MassMutual within the last two years unless otherwise noted.
Teresa Hassara oversees the MassMutual’s workplace solutions business, which serves 32,000 retirement plans and nearly 3 million participants. She is passionate about building financial acumen and independence among women of all ages.