Think ahead. That’s among the best advice for anyone who’s pondering their financial security and retirement planning. It also happens to be something women are very good at practicing.
Why does this matter? Because March is Women’s History Month in the U.S., and March 8th is International Women’s Day. Our standing advice, whether you’re male or female, is that it’s never too soon to start talking about retirement planning. But there’s mounting empirical evidence that women must get used to thinking about their after-work lives differently than men.
For starters, women live longer which increases their vulnerability to retirement savings shortfalls (RSS). According to a report released in January from the Employee Benefit Research Institute (EBRI), the average RSS is $22,783 for widows and $72,883 for single women. Single females also are the only group in this study in which at least half of qualifying households have some kind of retirement deficit, and 10 percent of these women have an RSS of more than $220,000.
These are dire numbers, but they come with some good news, particularly for women who have chosen careers with PERA employers. For example, the EBRI report says that single females without the option of a defined contribution plan (like a 401(k) plan) have an average RSS of $97,325, versus $24,486 for women who have 21-30 years of future eligibility to contribute to a defined contribution plan. This is why everyone, but especially women, should begin saving for retirement early in their careers. All PERA members have access to the PERAPlus 401(k) Plan to help decrease their potential RSS. Plus, PERA’s Defined Benefit Plan provides for greater security later in life thanks to the plan’s permanence and portability. (The EBRI report also cites such portability as a major factor in decreasing RSS rates.)
Here in Colorado, efforts are underway to increase women’s participation in the workforce. Last year the Bell Policy Center said that increasing women’s workforce participation to equal men’s, along with moving more women from part- to full-time work and expanding their opportunities into more employment sectors, could add $40 billion to the state’s economy by 2025. The think tank expressed optimism about this, citing the influx of women legislators into the Colorado General Assembly after the 2018 election. These new members—along with numerous existing ones—are viewed as a driving force behind potential new laws addressing paid family and medical leave, gender-based pay gaps, and new education and training programs for women. The arrival of a record number of women to Congress this year should also start moving these needles at the federal level.
Which brings us back to the first point, namely that women are often more effective investors than men because they’re more conservative and risk averse, they outperform men when investing, and they prepare better for unexpected events because they plan and tend to money-related issues on a more regular and predictable basis than men, i.e., they tend to think ahead. So even if you’re in the early or middle stages of your career, the message as always is that the sooner everyone starts addressing their financial situation, the better off they’ll be—especially women.