Take a moment and think of the women in your life.
Your mother? Your sister? Your partner or wife? Yourself?
And if you were to ask each how they feel about investing, what do you think they’d say?
We came across some eye-opening statistics:
Saving for retirement can be pretty daunting if you’re not sure what you’re doing, or you haven’t been given the proper tools to make it happen.
Here’s a deeper dive into how women generally approach investing, including their strengths and weaknesses, and how we suggest moving forward to build a successful retirement.
First, let’s look at how the saving and investing habits of men and women compare:
Overall, women have a fantastic foundation of saving in place.
Yet women still lag behind men when it comes to their total portfolio – according to MarketWatch only 9% of American women have $300,000 or more saved for retirement.
This is called “the investing gap.”
While the data shows women tend to be really good at setting money aside, the data also shows women often have their money in potentially inappropriate investments.
In fact, according to BlackRock, women keep about 71% of their investments in cash.
Essentially, many women aren’t taking enough risk with their money.
It could boil down to a lack of investing knowledge, as reflected in some of the earlier statistics cited. Or it could be a fear of riskier investments like stocks.
But no matter the culprit, the numbers say women simply aren’t investing their savings.
Because while cash might seem like a “safe” investment, even it comes with a risk: you lose purchasing power if the interest rate on a cash account isn’t keeping up with inflation.
(Inflation is why something that cost $1,000 back in 1999 now costs just over $1,500 and will cost close to $2,500 in another 20 years [assuming a 2.5% annual inflation rate]).
Holding cash might offer a feeling of security. But because you can buy less and less with the same amount of money over time, that safety is an illusion.
And for a woman who’s holding too much of her retirement money in cash? This “investing gap” is bad news if she’s facing a 20, 30 or even 40-year retirement.
On top of all that, women are already at a financial disadvantage when planning for the future.
Consider these three basic facts:
This combination of not taking an appropriate amount of risk, earning less, and living longer can be disastrous if not properly addressed.
Research has found that women:
Recommending a long-term focus, that you not jump in and out of the market, and emphasizing savings diversification is, not coincidentally, how we advise our clients each and every day.
Historically, stocks have been the only investment to consistently outpace inflation. But stocks come with risk, as well. So, how does someone approaching retirement – especially a woman – bridge this gap?
Everyone should be investing at the intersection where their willingness to take risk meets their need to take risk.
This is why working with a credentialed financial advisor is key. He or she can help determine the appropriate amount of risk to take that’s suitable for your needs and goals.
When it comes, not just to women, but all savers, do the following:
Don’t let fear or the unknown hold you or a loved done back.
Get educated about your options for a better financial future, today.