The Other Big Gender Gap?

Jane Bianchi
Posted

gender gap retirementIn the 1950s, women earned about 60% of what men took home. By 1990, the gender pay ratio had inched up to 70%. (Yes, it took over three decades to make “progress.”)

Today, that figure is closing in on 80%. But while women have made strides when it comes to pay equality, there’s another great money divide between men and women that may be just as alarming as that 1950s stat: retirement savings.

In fact, a new LearnVest.com survey found that an American woman’s retirement nest egg totals approximately $150,000, on average, while a man’s comes in at roughly $235,000. That’s a 57% difference! There’s also the fact that a recent Merrill Edge Report additionally revealed that men in the U.S. are planning to save $232,000 more than women for retirement overall.

And there’s even more to this disparity story: It turns out that attitudes about how to use retirement savings also clash between the genders. According to a Prudential study, the top financial priority for men in retirement is to “maintain their lifestyle,” while for women, it’s to “not become a burden to loved ones.”

Intrigued by these various findings, we decided to canvass the country for men and women in their twenties, thirties and forties, who make comparable salaries and are in similar life stages, to see where they fall on the retirement savings spectrum.

Then we asked Learnvest Planning Services Certified Financial Planner™ Katie Brewer and Laurie Nardone, a Certified Financial Planner™ at Shira Ridge Wealth Management, for their insight on what these people are doing well—and how they can help overcome the gender divide to save more.

And before we forget, here’s another stat to consider: On average, women tend to outlive men by five years, making squirreling enough away for retirement all the more critical.

The Twentysomethings

AndrewAndrew Legrand, 28, New Orleans

Relationship status: Single.
Job: Attorney at Andrew Legrand Law, LLC.
Total retirement savings: Just over $2,000 in a Roth IRA.
Contributing since: April 2013.
Contributes: $150 per month (no employer match).
Projects to have: $459,000 by age 69.
Projected monthly income in retirement: $1,912.

What Andrew Says: I just began saving for retirement this year, but I feel confident about where I am. I started my own firm right out of law school, and after just over two years as a self-employed attorney, I’m finally in a position to start thinking about my future. My plan is to max out my contribution to my Roth IRA this year. As for what I’ll do with that money in retirement, I don’t have any specific plans yet—but I do know that I need to save!

What CFP Brewer Says: It’s great that Andrew has started to put money toward retirement, while balancing the demands of self-employment. If he’s going to max out his IRA this year, contributing a total of $5,500, then he’ll have to increase his monthly contribution. Since he can only contribute up to $5,500 to a Roth, and the IRS will start reducing the amount he can contribute as soon as his salary gets up to $112,000, he might want to think about starting a small business retirement plan, like an SEP. The SEP annual contribution limits are higher (up to 25% of your salary or $51,000 per year), so he can save more that way.

What CFP Nardone Says: Since he runs his own business, another option for Andrew is to open a solo 401(k), which allows him to contribute up to $17,500 per year and combine it with a profit-sharing plan, if he’s profitable. If he does this or switches to a SEP, he may have a better chance of meeting his projection, because his current strategy with the Roth IRA will not get him to his goal.

As far as how Andrew is doing for someone of his age and gender, anyone like him who starts saving for retirement in their twenties is ahead of the game. Many people—especially those who are self-employed and don’t have a human resources representative giving them paperwork about retirement—don’t even give it a thought.

RELATED: Self-Employed? Re-energize Your Retirement Savings

  • Erica

    Wow I am definitely impressed by Aubrey and her saving prowess. Keep it up girl :)!! As to what the CFP are saying, they definitely raised legitimate concerns but they are not real obstacles. Aubrey stated she’s going to have house paid off by 45 and not a material person. So a 3k spending per month is not unreasonable. Getting healthcare on your own is also very do-able. Accessing retirement account without penalty before 59.5 can be done by using a roth ira pipeline. there are plenty of articles about it, just look it up.
    Keep it up Aubrey and enjoy your journey to early retirement :)

    • Aubrey Rose

      Thanks Erica! The CFP mentioned eventually having to support a partner, but I’m already doing that currently with my unemployed boyfriend, haha. The main thing I’m concerned about is future children…we’ll see if I can avoid spoiling them :) Thanks for the tip about the Roth pipeline. I’m setting up some passive income streams so that hopefully I won’t have to dip into my ret. accts until I’m 60 anyway!

  • Whitney Athayde

    Actually the wage gap is not even that large anymore. Check out this video for more information: http://www.youtube.com/watch?v=mH4lb88DMeo

  • Liz

    Shouldnt people under 40 plan to try on working until at least 72? Can LearnVest address a change in retirement age from 65?

  • Doug

    Isn’t it grossly simplistic to say that women make x% of men? Like, aren’t there 50+ factors other than gender to consider? Like if the man is a brain surgeon and the woman is a maid (could be the other way round)? Hours per year worked? Certainly a man and a woman working “at the same company” and “doing the same job” and “working at the same level of competency” etc. should be paid exactly the same. But until one has all of the important qualifiers a simplistic statement is meaningless.