How women investors can rewrite their financial futures

Women do it all — lead households, pay bills, run companies. But when it comes to saving and investing, advisers say there’s more women could do to ensure they’re better off in retirement.

"Women often feel like they need to wait until they earn a higher salary or have accumulated enough money to get started," Sylvia Kwan, chief investment officer at Ellevest, says. "But time and compounding are powerful allies towards building wealth and achieving a comfortable retirement. We want women to get engaged early and to invest early and consistently."

Earning less, spending more

Over the course of their careers, women earn less. You’ve probably heard that on average, women earn 82 cents for every $1 earned by men. This pay gap is wider for many women of color. Making less means accumulating less in Social Security and pension benefits because both are based on earnings history.

Women also spend more — women’s products are priced 7% higher than similar men’s products — and women live longer lives on average, so they have to support themselves through a longer retirement period and manage any health issues that arise.

Career interruptions

Many women are caregivers of parents, children or both, and that can mean career interruptions, causing them to earn even less.

Since the beginning of the COVID-19 pandemic, over 2.5 million American women have left the workforce, according to the Department of Labor. The Federal Reserve Bank of San Francisco recently reported that job losses affected women more than men, with the "she-cession" hurting mothers the most. On top of the opportunity cost of not working are the additional costs incurred while caregiving for others.

Rewriting the financial future

But these complications don’t mean that women can’t be well-prepared for retirement. Margo Sweany, wealth adviser at RMB Capital in Denver, says more women have to start learning about personal finance.

Get comfortable talking about money

"I don’t like to talk about money" and "money can’t buy happiness" are frequent statements that Sweany says she hears from her female clients.

"So much learning happens in social settings and many women are missing out on valuable learning opportunities out of perceived propriety," she says. "Money may not buy happiness, but it can buy health care, education and stability."

Be better informed

Improving your financial literacy is key to financial success, says Linda Erickson, founding partner and financial adviser at Erickson Advisors, an all-female firm of credentialed wealth advisers in Greensboro, North Carolina.

"The only avenue for women to become more empowered financially is by being better informed," she says.

"A financial adviser can help women take a holistic view of their finances, from accumulation to protection to distribution, helping them ensure all considerations are taken into account and planned accordingly," says Jamie Ohl, president of workplace solutions for Lincoln Financial Group.

If you can’t afford professional advice, Erickson says you can seek out local or online information and financial support groups.

Focus on you and your financial decisions

A 2017 Merrill study found that 52% of women feel confident in managing investments compared with 68% of men. Advisers say having less confidence can lead women to defer financial decisions to their partner, which can cause problems if you get a divorce or your partner dies.

"Ninety percent of women will have sole responsibility for their finances at some point in time," says Philip Weiss, principal at Apprise Wealth Management in Phoenix, Maryland. "If your spouse dies, your income will likely fall."

Make the most of your time

Women are sometimes more hesitant to invest, Weiss says.

"This can result in higher cash balances and increases the likelihood they will face a shortfall in retirement," he says. Cash usually loses buying power over time because savings rates are not high enough to keep up with inflation. Investing can potentially help grow your money so you can outpace inflation.

So advisers encourage women to invest early.

"One of the largest setbacks we see for women is waiting too long to get started with saving and investing," says Kwan of Ellevest, a robo-adviser that builds gender-specific factors such as the pay gap, career breaks and longer lifespan into its investing algorithms for women.