Retirement planning for professional women

Proper financial planning is essential for fostering financial wellness, yet women tend to have 40% less money set aside for retirement than their male counterparts^.1 Indeed, retirement planning for professional women has some way to go; women currently contribute 22% less to their retirement funds than men do.² Moreover, they likely require more retirement funds than men because on average they live five years longer.³

The figures suggest that women are overall less prepared for retirement than men. For instance, men’s 401(k) balances are 30% more than women’s.⁴ However, that is not to say that retirement planning is not a priority for women. In a recent survey, saving for retirement topped women’s short- and long-term goals.⁵ Yet, 20% of respondents admitted that they did not have a financial plan in place.  

Planning and preparation can help female professionals understand what financial security means in retirement and how to identify and mitigate the risks. However, there are factors to consider.     

Women are more likely to face career interruptions than men, which can further erode their earning potential and hinder their retirement savings. These breaks can also cause unwanted disruption from their career trajectory. Women may be unable to return to a previous employer, reenter the workforce amid unfavorable economic times, or enjoy the same level of seniority as before.

The gender wage gap can further hinder retirement planning for professional women. On average, a woman working full time makes 83 cents for every dollar earned by a man, according to the American Association of University Women (AAUW).⁶ At 75 cents per dollar, the disparity between men and women at executive level is even greater.⁷

Women across different professional levels are also more likely to take responsibility for their family’s household affairs and caregiving. They may have less time and resources than their male colleagues to progress toward addressing their long-term retirement goals.

From budgeting for daily expenses and bolstering savings to maintaining a growing and diversified portfolio of investments, financial tasks can seem daunting. However, with help from a specialist wealth team that understands their individualized needs, female professionals can take active steps in their financial journey toward fully realizing their goals.

Assessing the four pillars of financial wellness (saving, spending, borrowing, and investing) can help put an actionable plan in place, helping to realize each individual’s long-term vision of retirement. Identifying any shortfalls in financial planning can help identify wealth opportunities along the way.  

While women are as confident as men in tackling most financial tasks, they are more uncertain about making the right investment decisions^.8 Investing can be an effective strategy to prepare for retirement; with support from wealth specialists, women could potentially significantly boost their retirement savings from returns on profitable investments.  

From there, structuring and titling assets, estate planning, and understanding insurance needs can help consolidate retirement planning for women, further improving their financial position.

Reviewing saving and investment strategies on an ongoing basis can also be beneficial, allowing female investors to develop, and track, short- and long-term goals. For example, the power of compounding interest – interest earned on both the principal and the accumulated interest – can help women accelerate their wealth goals over time. And time in the market is more important than timing the market; beginning to invest earlier is preferable to playing catch-up later on. 

Many firms are addressing the gender gap in financial literacy by introducing financial wellness programs that educate all employees and help them plan for the future. These incentives can specifically address the stressors related to money and wealth for women – enabling them to prosper financially later in life.