Career opportunities for women have expanded greatly over the last couple of decades. Yet during their lifetimes, women still earn less money than men, primarily because they take time off from their jobs to care for children or aging parents.
Women also have longer lifespans than men, so they may need to fund additional years in retirement with fewer financial resources. One study found that the average retirement savings for a woman aged 65 to 69 was about 22% less than that of a man of the same age.¹
Given the challenges, it’s understandable that women are 42% more likely than men to express concern about having enough money for retirement (according to a 2012 survey).² Focusing on saving for the future and managing retirement plan investments wisely could help many women improve their retirement prospects.
Career Gains
Almost 60% of today’s U.S. college students are women, and the majority of graduates who pursue master’s degrees and doctorates are also women.³ Income disparity between the sexes has also improved — working women now earn about 80 cents for every dollar earned by men, up from 62 cents 30 years ago.4
As a result, female breadwinners have become more common than they were in previous generations. Around 40% of wives now earn higher salaries than their husbands.5
To make up for time spent outside the workforce, women may want to contribute as much as possible to employer-sponsored retirement plans, especially if they have the opportunity to benefit from a company match. The maximum employee contribution to a 401(k) or 403(b) plan in 2013 is $17,500 ($23,000 for those aged 50 and older).
Distributions from most employer-sponsored retirement plans are taxed as ordinary income. Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty, with certain exceptions such as the plan participant’s death or disability.
Risk Tolerance
A Federal Reserve Bank economist has estimated that the more conservative retirement investments chosen by women investors may be responsible for about 10% of the difference between men’s and women’s retirement account balances.6 The risk/reward trade-off means that investments involving less risk typically have a lower potential for return, and vice versa. Therefore, a portfolio with too little growth potential may not accumulate enough assets for someone to enjoy a comfortable retirement, and/or returns may not keep pace with inflation.
Some anxieties about investment risk among women may stem from a lack of knowledge, but a more cautious approach is not always detrimental. For example, some experts believe that investors who treat investing like a sport or competition tend to chase performance and could suffer losses as a result. As a group, women are generally less likely than men to be “overconfident” in their ability to select outperforming investments, a trait that may help them avoid costly mistakes such as trading excessively or taking inappropriate risks.7
Over the long run, a steady buy-and-hold strategy based on the investor’s financial goals, time horizon, and risk tolerance could serve men and women well.
In some marriages (and among older couples in particular), husbands may be handling many of the household’s investing decisions. Considering the possibility of divorce and the tendency for wives to outlive their husbands, it is likely that 80% to 90% of women may need to take control of their finances at some point in their lives.8
Women, whether single or married, might benefit from educating themselves on all aspects of household finances, including investments, insurance, and the beneficiary designations on retirement accounts.
1, 4) Insured Retirement Institute, 2012
2, 8) USA Today, August 16, 2012
3, 5) Time.com, March 26, 2012
6) AdvisorOne.com, February 23, 2013
7) Yahoo! Finance, March 12, 2013
INVESTING RISK DISCLOSURE
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
IMPORTANT CONSUMER INFORMATION
This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.
Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.
An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.
SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.
The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.
Securities offered through
Newbridge Securities Corporation,
member FINRA / SIPC
Investment Advisory Services offered through
Newbridge Financial Services Group Inc.,
an SEC Registered Investment Adviser.
Office of Supervisory Jurisdiction
1200 North Federal Highway, Suite 400
Boca Raton, FL 33432
Toll-Free: 877-447-9625
Phone: 954-334-3450
Fax: 954-489-2390
