Bridge the wage gap: Retirement planning for financial stability

Retirement planning is an essential aspect of establishing a strong financial foundation, particularly for professional women. However, women encounter unique considerations and occasional obstacles that must be addressed to achieve lasting financial resilience. In this article we explore the effects of the wage gap— how to understand it and bridge it— while providing some effective strategies for confident retirement planning.

Understanding the wage gap and lifetime earnings

The wage gap refers to the disparity in earnings between men and women. Despite advances in pay equity, the U.S. Department of labor reports that on average a women working full-time will be paid just 83.7% of a man in the same position. For Black and Hispanic women, the wage gap is even greater. Further analysis reveals that one cause of the wage gap is that women are more likely to work in lower-paying jobs with fewer benefits.

Beyond differences in employment type and salary, women face other challenges in establishing financial stability and building wealth. Through the course of their working life more women than men will take leave from their careers with 50% doing so for health reasons and another 50% doing so to care for young children or other family members. Career gaps as well as the wage gap then both contribute to lower lifetime earnings for women, crucially affecting Social Security which is calculated based on 35 years of earning. Due to career gaps and other factors, women receive on average 80% of the benefits paid to men. 

Lastly, women tend to live longer than men, with an average lifespan of 79 years compared to 73 for men. These additional years and the potential expenses related to healthcare or other needs add to the amount of money needed for true financial security. Considering the factors which lead to lower lifetime income for women as well as the potential need for more savings due to longevity are two crucial components to a strategic retirement plan.

Strategies for bridging the wage gap and planning for retirement

Given the challenges and obstacles described, the support of an experienced financial professional can help you bridge the wage gap and plan for retirement effectively. By identifying your retirement goals and developing a personalized plan, you can maximize your retirement savings and mitigate your exposure to financial risk through effective strategies.

As a first step, to address the base problem of lower income, consider exploring alternative income streams. Part-time work or consulting opportunities can help increase your income and expand your resume into new sectors. You might also consider investing in additional skills or education to open up new avenues for higher-paying opportunities.

Next you will want to consult with a financial professional to help you work through some of these essential pieces of a comprehensive financial plan:

• Managing expenses: Developing effective saving and spending strategies and managing expenses can help you effectively allocate resources toward retirement savings.
• Debt management strategies: Paying down debt as early as possible can allow for more savings and ability to invest.
• Maximizing retirement account contributions: Taking advantage of retirement account options, such as employer-sponsored plans and individual retirement accounts (IRAs), is vital to making the most savings potential. A financial professional can guide you on strategies to help increase contributions and take advantage of various tax efficient strategies which might apply at different phases of your working and retirement life. For full tax advice, you should consult a tax professional of CPA. 
• Understanding retirement benefit options: Gaining a comprehensive understanding of retirement benefit options, including Social Security and supplemental income options such as annuities, allows women to make informed decisions that align with their retirement goals.

Maintaining a fulfilling lifestyle during retirement

While financial planning for retirement is crucial, you’ll also want to think about other aspects of this phase of life, with all its potential variations. These considerations are highly individual and can inform your choices now as well as your long-term financial plan. They could include:

• Creating a retirement vision and setting goals: Let yourself daydream a little to flesh out your retirement vision. Based on your goals and priorities you can set the financial targets and other steps needed to achieve them.
• Balancing financial needs with personal fulfillment: Striking a balance between financial security in the long run with personal fulfillment and work-life balance now is essential for a satisfying retirement.
• Exploring post-retirement opportunities and hobbies: Engaging in post-retirement opportunities, pursuing hobbies, and exploring new interests can contribute to a fulfilling and meaningful retirement.
• Building a support network: Whether with family or friends, establishing a support network of like-minded individuals— in addition to seeking guidance from professionals— can provide emotional and practical support throughout the retirement journey.

While women face unique challenges in retirement planning due to wage inequality, employment gaps, and other gender-related issues, financial planning with the support of a financial professional can mitigate negative impacts and empower women to achieve lasting financial stability. By taking proactive steps now and considering the strategies outlined in this article, as well as ongoing education, women can bridge the wage gap, overcome financial obstacles, and build financial resilience.

To navigate retirement planning successfully, professional women are encouraged to work with a financial professional who can provide personalized guidance tailored to their specific circumstances and retirement goals.