Last month, Congresswoman Carolyn B. Maloney, Ranking Member of the U.S. Congress Joint Economic Committee (JEC) released a new report outlining the potentially devastating long-term effects of the gender pay gap on women, their families and the economy.
“Lower pay throughout their working lives means that women contribute less to retirement plans, receive lower pensions and lower Social Security benefits. The result is that women have substantially less income than men in retirement and are much more likely to live in poverty as they grow older,” according to Congresswoman Maloney.
Among the key findings of the report:
- A woman working full time, year-round earns $10,800 less per year than a man, based on median annual earnings. This disparity can total nearly $500,000 over the course of a career.
- The lower lifetime earnings hit women particularly hard in retirement. Retirement income for women ages 65 and older ($17,400) is 44% less than the median income for men in the same age group ($31,200). Women 75 years and older are almost twice as likely to live in poverty as men.
The findings of the Maloney report comes as no surprise to us at SUM180, but they do underscore the urgent need for every woman to have a financial plan.
When you consider that almost 50% of U.S. household breadwinners are women, and that women in general need a bigger nest egg because we have a longer life expectancy than men, the importance of having a personal financial plan is very clear. Of course, we must continue to work collectively toward systemic change that addresses the gender pay gap, but every woman must also take individual action to protect her own financial health and that of her family. Knowing the right next steps to take—no matter what curve balls come your way—requires having a plan.
To women who want to start building a more secure future despite the gender pay gap, I recommend the following:
- Understand your financial big picture. Securing your future begins with knowing where you stand financially right now. Work with a good financial planner or online financial planning service to create a snapshot of where you stand financially, including your income and expenses, assets and debts. This ‘snapshot’ should also include your most important next steps, explained in a straightforward, accessible way.
- Make overcoming debt a priority. That waterfall of debt is the absolute enemy of savings. Learning to live within a budget can lift away the stigma and stress associated with financial uncertainty. It builds confidence and is an essential early step in moving toward your financial goals.
- Use online services to get a jump start on financial planning. Online financial planning services offer a convenient, affordable alternative to traditional financial advisory services. (This is exactly what SUM180 was built to do!) For women, who often prefer to research topics they are uncomfortable with on their own and gain a basic understanding of their options before reaching out to friends or professional advisers, online services and resources can be a particularly welcoming solution.
- Get personal with your adviser. Even the most user-friendly software cannot address all the emotional aspects attached to our money. There are always intangibles in deciding what to do next financially. The best human advisors will gather all your information and then explore choices with you. One good option: hybrid financial planning services that combine the benefits of online advice with human advice, and deliver the best of both.
- Know what you’re worth — and fight for it. A growing category of experts called salary coaches or compensation analysts specialize in helping women figure out what their singular skills and experience are worth in the professional marketplace and how to negotiate for that. To a woman unaccustomed to confrontation and negotiation, a salary coach’s insights can be invaluable, whether she is crafting a resume to fit a particular job description, negotiating starting compensation with a hiring manager or asking her current boss for a raise.”