“Closing the Investment Gap: Strategies for Women to Secure Their Retirement”

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Understanding the Investing Gap

Let’s start with some good news: More women are taking a seat at the investment table. According to a 2021 Fidelity Investments analysis, over two-thirds of women are investing outside of retirement, up from 44% in 2018. Additionally, women were found to outperform men in investing by 40 basis points.

Despite these positive trends, the gender investing gap still exists. Research from George Washington University indicates that women’s financial literacy around investing tends to lag behind men. This is significant because financial literacy and confidence are both linked to stock market participation. Typically, women invest less often than men, which can greatly impact their financial preparation for retirement.

What Is the Investing Gap?

Similar to the gender pay gap, the gender investing gap also works against women. Confidence around investing likely plays a role. The Fidelity research mentioned earlier found that only one-third of women feel confident in their ability to make investment decisions. As a result, women may feel more comfortable saving versus investing.

Sitting on the sidelines can have a domino effect that impacts a woman’s long-term financial health. Those who keep the bulk of their wealth in cash, and largely neglect equities, may miss out on significant growth potential. While the average interest rate on savings accounts is currently just 0.35%, the stock market has historically had an average annual return of around 10%.

A variety of factors play into the gender investing gap. Women earn 82 cents for every dollar a man earns, according to a 2022 PayScale report. That may leave women with less discretionary income to put toward investing. At the same time, two-thirds of caregivers in the U.S. are women. It stands to reason that women are probably more likely to put their careers on hold or scale back at work to care for children or aging parents. That can have a direct impact on their earning power—and their ability to save for retirement.

How Does the Investment Gap Impact Women’s Retirement?

The gender investing gap can make it harder for women to build their nest eggs. Case in point: Caregivers may intermittently reduce or pause their retirement contributions. The general rule of investing is to add to retirement funds early—and often—to maximize the power of compound interest. Beyond that, they could be cutting themselves off from an employer match, which is essentially free money.

Women are more likely than men to have no retirement savings at all, according to the U.S. Census Bureau. Vanguard retirement plan data also found that average and median retirement account balances are almost 44% higher for men. This research focused on defined contribution plans like 401(k)s. Of course, investing isn’t limited to only retirement accounts. The gender gap can also apply to other investment vehicles, like brokerage accounts and health savings accounts (HSAs).

There’s one other important retirement consideration for women: They have a longer life expectancy. That means they’ll likely need to save more to fund a longer retirement. This is all to say that women may be at higher risk of outliving their money.

How to Get Started With Investing

Now for some positive news: Whether you’re getting a late start with investing or just looking for ways to boost your financial portfolio, it’s still possible to grow your wealth. Here are a few simple ways to begin.

• Enroll in your workplace retirement plan: This can help simplify investing. With a 401(k), for example, you simply choose a recurring contribution amount to be automatically taken from your paycheck. A 401(k) also offers nice tax benefits, like tax-deductible contributions. Your employer might also match some or all of your contributions.
• Open an individual retirement account (IRA): Unlike an employer-sponsored 401(k), an IRA is an investment account you can open and fund on your own. Both Roth IRAs and traditional IRAs offer unique tax breaks.
• Consider a robo-advisor: If you want to invest beyond dedicated retirement accounts and prefer being more hands-off with investing, you can look into a robo-advisor. It’s a platform that uses algorithms to automatically select investments on your behalf based on things like your age and risk tolerance.
• Explore Series I bonds: Bonds in general are considered low-risk investments. Series I bonds stand out because they use two interest rates—one that’s fixed and another that’s indexed for inflation. Series I bonds purchased until April 30, 2023, have a guaranteed return of 6.89%.
• Choose the right investment strategy: There are lots of asset classes and investments out there. The right ones for you will depend on your financial goals, risk tolerance, and age. No matter what you choose, properly diversifying your portfolio is key because it helps spread out investment risk.

The Bottom Line

The gender investing gap can hold back women investors, especially when it comes to retirement. Knowing what it is, and how to overcome it, is an important part of leveling the playing field. In the meantime, O1ne Mortgage is here to assist you with all your mortgage service needs. Call us at 213-732-3074 to speak with one of our expert loan officers today!

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