By Kelly Woo, CFP®

New data from San Francisco-based Personal Capital points to a widening demographic gap in the U.S. retirement savings market. 40% of women and 39% of millennials have nothing saved for retirement, while men across older demographic age groups are faring better. 

Assuming that both men and women have equal salary, noticeably, more of my female clients commonly have had a wider gap in their career than male clients before reaching retirement – reasons varying from marriage, supporting their spouse in career pursuit, having kids, caring for parents, or taking a momentary break to care for an ill family member. Aside from the time and money consumed to care for family, women generally tend to have conservative investment personalities that may result in a reduced rate of return over an extended period of time. All of which add onto produce a possibly lower social security paycheck and diminished retirement funds compared to the opposite gender that could have unremittingly contributed and received matching from the company

What’s more is that females may have more sizable expenses compared to male clients.

A few to name would be:

  • Personal maintenance
  • Gift exchanges with family and friends
  • Caring for children or aging/ill family members

As I noticed, female clients, invest in personal care more than male clients for personal maintenance or look and feel. Aside from self-care, women are known to exchange gifts more routinely – birthdays and holidays with friends, family, coworkers, etc. They are also heavily involved in the lives of family members and continue to support in ways possible.

It may be during their aging parents’ retirement with their financial needs, a feat as small as picking up groceries, clothing and basic necessities for them requiring extra expenses out of their pocket. Many young female professional clients of mine have taken days, weeks and months off work to care for ill family members, which in some cases impact their career pursuits. The above-mentioned is not to take away from men’s responsiveness to family needs, but to note that women have shown to be central caregivers in the family.

Statistics show that 60% of caregivers are females (average age 49) who are likely to spend more than 24 hrs per week providing care. 19% are able to provide financial care, all collective towards social security benefits being lower for women than for men.

There are also supplementary playing factors that contribute towards women falling behind in retirement savings. It correlates to women being more conservative than men; when it comes to investment options they tend to be risk-averse. They tend to stray away from risk-taking – afraid of non-traditional investment options that may yield higher returns because of the risk factors and often rely too heavily on guaranteed products and options that are conservative and hence may result in lower returns over a long time.

Aside from being a conservative investor, various reasonings exist for the reasons why women and millennials see a shortage in savings, but it can be seen correlated to smaller expenses built up in addition to the time spent away from work to care for loved ones. Maybe this is another reason why we need government and private companies to support employees taking time off to support children, aging parents, and etc. and women to be proactive about planning about various investment options especially non-traditional investment options that may help them with a higher rate of return in the long run.

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