By Kristin O’Keeffe Merrick 

Originally published on Forbes.com on 9/11/17

I had a realization recently that I spend a great deal of time telling my readers how to do things—how to prepare for marriage or a baby, how to save more money, etc.—but I haven’t spent enough time on explaining the “why”. Why should you be financially responsible? Why should you start saving for retirement? I often assume that everyone knows the “why” but the more people I speak to, the more I realize that many do not know why planning for one’s financial future is so important. Allow me to take the next few paragraphs to adequately scare you and then we can focus on some ways to approach the problem.

You need to save for retirement because if you don’t you will not have any money to live on when you retire. It is a pretty basic concept. Our Social Security program is challenged and it is difficult to say if our government will be able to guarantee its existence for future generations. In addition, pensions are becoming a thing of the past. If you do not save for retirement, you may find yourself broke and without any safety net.  If you have no retirement savings, it may be difficult to retire. It’s fairly simple. But retirement becomes a bit more nuanced when it comes to a woman planning for retirement versus a man.

Women Need To Save More Than Men To Achieve The Same Level Of Retirement Savings: You are not shocked by this. We all know that there is a very real gender pay gap in this country. There is also a serious gender retirement gap. According to TIAA, if Susie and Jimmy both make the exact same salary, Jimmy has to save 10% of his income for retirement but Susie has to save 18%. There are three widely cited reasons for this:

There Is Another Reason: In my opinion, there is another alarming reason for the retirement gap. It lies in the fact that women generally put their own needs very low on the list of things they need to tend to. I work with all types of women—executives, business owners, attorneys, stay-at-home moms. The common thread among these amazing women is that they spend 95% of their time doing things for other people. That remaining 5% is spent on basic survival needs like eating, sleeping, personal maintenance and perhaps some socializing. What does that mean for her personal finances? It means that she has generally neglected the entire topic. It means that she has not saved or invested enough. It means that her 401(k) from her job eight years ago is either being completely ignored or is invested in questionable investments, earning almost nothing. It means that she has no outlined targets or goals and has not created any kind of financial plan. It means that she will have to save 8% more than a man to achieve the same level of retirement savings. In addition, women have a longer life expectancy than men so they need more money for retirement because they will be on earth longer.  

How To Close The Gap: This is an interesting issue for many reasons. Topics like the gender pay gap are incredibly hard issues to solve. But what you can do is acknowledge the issue and start planning for it. Knowing that you face these hurdles is half the battle. The other half of the battle is doing something about it. Here is my advice:

Perhaps I should be more explicit in my closing. You cannot rely on someone else to save for you, plan for you or invest for you. Take the initiative and start focusing on this today. You know you have some headwinds to face but armed with the information, you will be just fine. And while you are getting financially organized, maybe ask for a raise too! Kill both the gender retirement gap and the pay gap at the same time!

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