Last week, we told you all about what the gender pension gap is and 10 reasons why this gap exists. You can read about each of these reasons here. Regardless of why the gender pension gap exists, the most important question remains; how can we close this gap in retirement savings?
In this article, we’ll cover seven of the best methods you and your business can take to support working women and help them close the gender pension gap. So, keep reading to discover how you can help your female employees get and stay on track to retire comfortably.
How to Help Women Boost Retirement Savings
7. Learn About Finances
The first thing women can do to improve their finances is to learn more about the subject. Seek out a financial expert and pick their brain. Or, pay one of these experts to consult with you. Having basic financial education is vital when determining how much you’ll need for retirement. Plus, there are several economic factors women should consider that aren’t necessary for men to consider.
For example, in America, there’s a gap in the returns from housing investments between men and women. A report from the Yale School of Management found there’s a significant disparity in financial returns from housing investments. Single men earn one percentage point higher unleveraged returns a year on housing investments, relative to single women.
This gap increases to 6 percentage points after adjusting for mortgage borrowing. The report also found women typically buy the same property for about 2 percent more and sell for 2 percent less. These percentages arise from women negotiating smaller discounts relative to the listing price when buying and offering more substantial discounts when selling.
6. Contribute to a Health Savings Account (HSA)
Another method women can use to improve their chances of retiring with enough money is to enter into and contribute to a health savings account. HSAs are savings accounts to help employees save for medical expenses while reducing their taxable income. In 2018, the average American household spent almost $5,000 per person on healthcare.
Similarly, a 2019 study found the number one reason behind bankruptcy for American is medical issues. According to the survey, 66.5 percent of all U.S. bankruptcies were tied to medical issues. An estimated 530,000 families turn to bankruptcy each year due to medical problems and bills. Plus, because women tend to live longer, they also tend to spend more money in retirement. And, because they’re living longer, women spend $194,000 more on healthcare in retirement. Much of these costs are due to both increased longevity for women and relying on long-term care in their later years.
Contributing to an HSA can help offset these ever-rising costs. An HSA allows participants to save money, free from federal income tax, to cover qualified medical expenses. Additionally, if you contribute to your HSA through a pre-tax payroll deposit through your employer, you don’t have to pay social security taxes on those contributions, either. Plus, any growth of your HSA account is tax-free if used to pay for qualified medical expenses.
5. Save With Your Employer’s Plan
As previously mentioned, women must become confident in their financial knowledge. A study by Corporate Insight found women aren’t as confident as men about their finances. And, not only are these women less sure, they’re, on average, less prepared for retirement and engaged in fewer employer-sponsored financial programs. It’s vital employers inform your female employees about the advantages of saving with your company’s employer-sponsored retirement plan.
How much you should contribute to your company’s plan is dependent upon your individual financial situation. But, at the very least, employees should strive to contribute up to the employer match amount. Your employer’s match is free money. If you don’t contribute enough to receive the full match, you’re essentially throwing away this money.
4. Utilize an Individual Retirement Account (IRA)
Another key tool to help women avoid a retirement savings shortfall is an individual retirement account. An IRA is a tax-sheltered retirement account you can set up through a bank, investment firm or insurance company. There are 11 different types of IRAs. Each kind of IRA provides differing tax incentives.
Even if you are contributing to an employer-sponsored retirement plan, it may be wise to open an IRA. Utilizing an IRA can give you distinct tax-advantages that differ from your employer’s retirement plan. For example, if you contribute to a Roth IRA, annual contributions aren’t tax-deductible, but all earnings and your principal are. Additionally, unlike employer-sponsored plans, you can withdraw money from a Roth IRA at any point without penalty.
3. Wait to Claim Your Social Security Benefits
Something else your female employees can do to bolster their retirement savings is to wait to claim their social security benefits. As previously stated, women tend to live longer than men. Because of this increased likelihood of longevity, it may be prudent for women to wait to claim their social security benefits. The longer you wait to claim Social Security, the more your monthly benefit increases, up to the age of 70.
2. Fight for Yourself
Unless you’ve been hiding in an underground bunker for the past 30 years, chances are you’ve heard women still aren’t being paid equally for equal work. One of the ways you can combat this gender pay gap is to negotiate your salary. According to The Motley Fool, multiple studies have shown men are more likely to negotiate their salaries than women. So, when taking a new job, or beginning a job search, keep this in mind and make sure you’re not merely accepting your new employer’s first offer.
1. Employee Benefits Are Key
One of the most essential factors in closing both the gender pay and gender pension gaps is improving your company’s employee benefits offerings. There are a few specific benefits that really help working women. We’ll touch on some of these benefits here. The first employee benefits your firm can use to close the gender pension gap is caregiving benefits. Caregiving benefits are designed to alleviate the pressure employee who double as unpaid caregivers, experience.
Similarly, flexible work benefits help women, especially working mothers work around the other demands of their lives such as childcare or caring for an aging parent. One Gallup poll found 53 percent of stay-at-home mothers say flexible hours or work schedules are a significant factor in their ability to take a job.
Also, benefits such as paid parental leave can help eliminate the motherhood penalty, which is a financial penalty many working mothers experience due to a child-related absence from the workforce. Parental leave is better than just maternal leave, because it promotes both parents to take off, which can help remove the stigma from child-rearing related absences. Reducing this stigma is key to reducing the overall gender pay gap.
By now, you should understand both what the gender pension gap is, why it matters, and what your organization can do to help your female employees bolster their retirement savings. Use these 7 tips to help your female employees to build retirement savings that will last.