Women earn less
Generally speaking, women earn less over the course of their lifetimes than men. There’s a lot to unpack in that statement, though.
First, women get paid less than men, on average. The gender pay gap is shrinking with time (in 2024 women earned 84% as much as men), and a growing number of women are the breadwinners in their families. But there’s more to the equation than salary levels.
Consider career breaks: Women are more likely to pause their careers to care for family members. That might be raising children, but it may also be taking care of an aging parent or relative. These pauses in earnings can mean a pause in saving for retirement. Plus, when women return to the work force, they may face lower salaries or limited career growth opportunities as a result of those breaks.
There are ripple effects from there: If you pause your contributions to your retirement account, you may wind up with a smaller nest egg. A smaller nest egg can alter how you, or an advisor, look at risk when it comes to investing.
Career breaks can even impact government benefits. Social Security is based on your 35 highest-earning years. If you work less than 35 years, or if your salary is lower over the duration of your career, it can impact what you’re entitled to later on.
A good financial advisor can help you proactively plan for these types of breaks. There are tools, ranging from basic IRAs to spousal contribution benefits, that you may be able to leverage to keep your financial plan on track even if you step away from work for a period. A good advisor can also help you take a holistic approach to risk management.
Life expectancy
To further complicate financial planning, women may need to make their (potentially smaller) nest eggs last longer. Women tend to live longer than men—79 years compared to about 73 for men. To counterbalance this, women may think they need to take a more conservative approach to investing in retirement (to focus on preserving capital) as well as income and withdrawal strategies. However, the opposite might be true.
This is another instance where financial realities may dictate investor behavior rather than women having any inherent aversion to risk.
There are additional tools women might consider to help ensure their money lasts as long as it needs to (with enough left over to fulfill any legacy or estate planning goals you might have). For instance, women might be strategic about life insurance, trusts, tax planning and more. This type of planning can be highly personal, and a financial advisor may be able to help you make the right choices for your personal circumstances.
Knowledge is power
Perhaps the biggest misconception around women and money is that women aren’t interested in financial planning, saving, or investing. While pop culture may market to women as spenders, the reality we see in our office shows women want to embrace financial education and optimize their resources.
When women educate themselves, the narrative starts to shift. For example, when we discuss the pros and cons of different investments with female clients, we find many of them are not risk averse. This is even more pronounced when we start to discuss how different investments work together as part of a broader portfolio and holistic financial plan.
Lately, we’ve also seen more women come to our meetings prepared with specific questions related to current events or long-term planning. As a financial advisor, I want to encourage this trend, as I believe knowledge is power when it comes to women and money.
Get proactive to avoid surprises
I also want to help women avoid financial surprises. This isn’t unique to women, but we frequently encounter situations where one spouse isn’t tuned in to what’s happening with family finances until a surprise event—a death in the family, a surprise separation or divorce, or even a positive event like an influx of cash.
When this happens, the unprepared party must get up to speed on financial topics while simultaneously navigating big emotions and other personal details.
Which ties back to knowledge. The best way to prevent surprises, whether that’s not knowing your spouse’s retirement account balance or earning a smaller-than-expected Social Security benefit, is to get proactive about your finances.
Make sure the financial professionals you work with—whether it’s a wealth advisor, tax accountant, or attorney—take the time to explain your circumstances to you (not just your spouse). If they don’t (or won’t), it’s OK to seek a second opinion or to look for an advisor who will really listen to your questions and concerns.
If you’re wondering how to start getting proactive about your finances, consider meeting with a financial advisor.
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