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Closing the financial gender gap

There’s a downside to specializing in financial planning for women. While I take great pride in the fact that I spend much of my time helping women build financial confidence and create stronger financial futures, my job can get seriously frustrating. Why? Because no matter how much the gender gap is mentioned in political speeches, and no matter how wrong we know the disparity is, it doesn’t seem to be going away any time soon. According to the American Association of University Women’s recent report “The Simple Truth About the Gender Pay Gap,” women earn an average of 79 cents to the dollar compared to men. Women of color and older women fare even worse. In other words, 79 cents is the best-case scenario, and it’s a pretty bad starting point.

When it comes to saving, this earnings gap is magnified. With lower earnings, women have 20% less discretionary income available for saving. Less savings means women are less prepared for retirement, less able to retire as early as men do, and often have less retirement income even when they do stop working. The result: a shorter, less comfortable retirement. It’s no wonder women tend to suffer from “bag lady syndrome,” that less-than-pleasant term for the fear of ending up penniless and homeless. And while it may sound extreme, this fear is very real for far too many women.

Of course, the gender gap isn’t the only dynamic at play here. Women—particularly baby boomers and older—were raised with the idea that a solid financial “plan” meant finding a reliable man to provide financial support, and maybe getting a teaching credential just in case. To find a husband, women often spend their limited resources on presentation (clothes, makeup, hair, nails, and more) in hopes of attracting their financial security blanket. While younger women may scoff at the idea, in reality, the myth that men are some sort of financial guardian for women is still alive and well. Perhaps even worse, women tend to hand over the financial reins to their male partners, often hiding their heads in the sand when in comes to money. It’s a dangerous way of thinking. It taints our relationship with money, including our ability to be financial grown-ups and a full economic partner. It inhibits our financial confidence, and it limits our ability to take charge of our financial health and close the gender gap once and for all. 

My client Lydia is a great example. When her husband Jim died seven years ago, figuring out how to transfer assets and how to invest the money was the last thing she wanted to deal with. Jim had always handled the money, and she felt lost in this “whole new world” of financial planning. Jim’s stockbroker offered to help by rolling Jim’s annuity into a new one. When Lydia signed the agreement, she didn’t understand the surrender charges on the new annuity or even what she was signing. The broker played the role of helping the grieving widow well while he captured a hefty commission for himself. Lydia came to me when she sensed she’d been betrayed. Luckily, we were able to unwind the transaction, and since then she’s become educated and financially empowered. I only wish she—and many women like her—had never been in the situation in the first place.

Whether a woman is married, divorced, widowed, or single, I believe half the battle in closing the gender gap is changing our attitudes about money. The gender pay gap has barely budged in more than a decade, so it’s likely to be with us for some time, but here are six ways we women can do our part to help change the game:


  1. Be financially self sufficient in your marriage or any relationship.
    I can’t tell you how many women I’ve worked with who “trusted” their partners to do right by them and were bitterly disappointed. Take equal responsibility for your financial health. Remember: building your financial future isn’t anyone else’s job. It’s not your husband’s job. It’s not your advisor’s job. It’s yours.

  2. If the bottom line goal is to create wealth, make erasing debt your #1 priority.
    If bringing home 21 cents less then men for every dollar you earn makes you mad, consider this: If you have $5,000 in credit card debt, you could be paying as much as 40 cents more on every dollar you spend. Consumer debt compounds negatively, drags on your wealth, and strips away your ability to “outsave” men. Do everything you can to eliminate the debt you have today, and be realistic about spending to be sure it doesn’t creep back up in the future.

  3. Invest in yourself.
    Make financial choices that increase your earning power. Learn new skills. Get your MBA. Earn a professional certification. (Note: “Investing” in Botox, designer handbags, and little dogs are not part of this plan!)

  4. Invest early and often to take advantage of compounding.
    The more your money has time to grow on its own, the more wealth you’ll have to fund your retirement. Start as soon as possible and increase the amount you invest and save each year. If you get a raise, save half of it and spend the rest. 

  5. Getting divorced? Hold on to assets that generate long-term wealth.
    While you may feel emotionally attached to your home, a house is not an investment asset. Focus on retirement funds and other savings vehicles that can produce income 20 years down the road.

  6. Maximize your Social Security benefits.
    With lower earnings, it may be tempting to start claiming Social Security as soon as you're eligible, but delaying your claim just eight years from age 62 to 70 can increase the value of your benefit by as much as 76%. For women, that pay raise can do wonders in helping support a longer lifespan.

I hope the gender pay gap will someday become a thing of the past. Until that happens, make it your mission to change the things you can control. Get educated about financial planning, take responsibility for your financial future, and be sure you’re on track for a long, happy, healthy retirement.

Need help with taking charge of your finances? Let’s schedule a time to sit down and explore where you are today and how to plan for tomorrow. As always, I’m here to help.

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09 November 2016

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >