When it comes to attaining financial security, women face a
steeper climb than men. But we also have a few advantages.
Most Americans, regardless of gender, are financially
illiterate. Few of us learned much about money in school, and it
shows. Economists Annamaria Lusardi and Olivia Mitchell
asked a group of Americans over the age of 50 three basic questions
about finances, and only a third got all three right.
Thus, it's little surprise that too many Americans start saving
and investing for retirement much later than they should, leaving
them with woefully underfunded retirement accounts. According to
the 2010 Retirement Confidence Survey, more than half of American
workers have less than $25,000 socked away (excluding the value of
their home and any pension they may have).
However, in addition to all these disadvantages, women must
contend with several additional hurdles.
The short end of the stick
For starters, the average woman earns less than her male
counterpart. According to the Labor Department, a woman's median
weekly paycheck is about 20% lower than that of a man.
Compounding that problem, many women spend fewer years in the
workforce, since they often end up caring for children, parents, or
others. Thus, they have less time in which to build up retirement
In addition, many women have participated in traditional
gender-based role division, letting the man of the house manage
their finances. And many of them supported spouses in their
marriage's early years, too. These two factors can be problematic
if a couple divorces. Women who leave money management to husbands
also suffer when they're widowed and suddenly have to take
Lemonade from lemons
Thankfully, two other disadvantages that women face can be turned
into advantages. First, women tend to live longer than men. That
doesn't sound like a problem, but if the woman hasn't amassed a
sufficient nest egg for retirement, she'll face a greater chance of
running out of money. However, women who build a solid nest egg can
often enjoy a bonus set of comfortable years.
In addition, various studies have demonstrated that men are more
likely to be overconfident when investing, while women tend to be
In fairness, avoiding risk too frequently can kill your
retirement prospects. Investing all your money in super-safe CDs
and bonds could leave you with slow growth and meager returns in
the long run. Over most long periods, stocks have outperformed
bonds, making stocks a far superior option for investors with many
years left until retirement.
Still, the fact that the average woman tends to be more cautious
than a man when investing is actually
. It's smart to spend time studying a possible investment and
asking questions about it, rather than plunging ahead just because
you have a good feeling about it.
Tips for a richer retirement
Women who want to enjoy financial safety and comfort in their
golden years can benefit from taking a few simple steps today:
- Assess your financial condition and goals. Determine how much
you need to save for retirement, and how you'll get there.
- Read up on personal finance and investing. If you think it's
boring, or that you won't be able to understand it, you're
selling yourself short.
- Study your insurance options. Long-term-care insurance and
immediate annuities could make smart investments, depending on
when you purchase them.
- Save and invest more.
- Consider working a few more years to beef up your nest egg.
That can also help you delay taking Social Security, leaving you
with a bigger monthly benefit when those checks do start
- If you're being too conservative with your long-term money,
start investing at least a little more aggressively. If you lack
the time or interest to pick strong individual stocks, even a
broad-market index fund can give you better returns.
- Make the most of your tax-advantaged retirement plans. Fund
your 401(k) at work up to your employer's match amount (at
least!) and set additional money aside in a traditional or Roth
- If you and a bunch of friends all want to learn more about
investing, consider pooling your money and research skills in an
Ginger Rogers, as the saying goes, did everything Fred Astaire
did -- but backward, and in high heels. Just like her, women can
perform as well (or better!) than men in investing. They simply
have to overcome a few more obstacles.
True to its name, The Motley Fool is made up of a motley
assortment of writers and analysts, each with a unique
perspective; sometimes we agree, sometimes we disagree, but we
all believe in the power of learning from each other through our
Longtime Fool contributor
does not own shares of any companies mentioned in this
The Motley Fool is
Fools writing for Fools
Copyright © 1995 - 2010 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a