The good news is that women's pay is on the rise. The gender pay gap may not have entirely closed, but women's incomes are rising. However, while women are gaining on men's earnings, they are still behind men in terms of financial planning. Research conducted by the bank HSBC highlighted that women are most at risk of falling short of income in retirement. Where women are actively undertaking financial planning, the focus is more on short-term financial issues such as building up short-term savings and managing the household budget. So, what should women be doing to ensure that they are on solid financial footing and that their futures will not see them short of cash? We'd suggest women save more, start saving earlier, stay involved in their financial planning and don't always play it safe.

SEE: Women And Finances: Is There A Gender Bias?


Save More
Statistically women live longer, so it is even more important that they have savings in place for the future. Because women tend to take time out of the workplace to have children and look after families, their Social Security benefits are often less than their male counterparts. This means that private saving is even more important. Women should aim to save in three ways: Social Security, a 401(k) pension or retirement saving plan, and personal savings.

Start Earlier
It is never too early to start saving for your future. At whatever stage in your life you are at, you should start planning for your own financial security. In fact, this is where women lag behind men – they don't make a plan for the future. One of the key findings in the HSBC research was that while the majority of men had a clear financial plan to guide their financial decisions, just 44% of women said that they had a plan for the future.

Women should realize that their savings will build substantially over the years. If you could grow your savings at 10% each year, saving 10% of a $50,000 salary from your mid-20s would result in over $2 million at age 65 for retirement. Start saving today and see compound interest build that amount over the years.

SEE: Anytime Is The Right Time To Start Saving For Retirement



Stay Involved
Women may hand over their financial security and planning to their partners, but it is wiser to stay involved in the process to ensure a solid understanding. This is especially crucial in view of the fact that women tend to outlive their husbands and will become solely responsible for their own financial planning.

The Women's Institute for a Secure Retirement found that women are much more likely to be alone in old age, and elderly women are more likely to be poor. The percentage of the female population over age 85 who are widows is more than 85% compared to about 45% of men. At the present time, four out of 10 women over 65 depend on Social Security for virtually all of their income, which is a worrying situation that must be improved.

Don't Always Play It Safe
A big difference between men and women's finances is their attitude to risk. While only 25% of men consider themselves as 'risk averse' investors, nearly 40% of women shun higher-risk investments such as stocks.

Now, risk is not always good. Risking all of your savings is a dangerous and ill advised strategy. However, the no-risk options regularly have low interest rates. If the interest on your savings account doesn't beat the cost of inflation, then your investment is actually losing money. Striking a balance of risk-free and calculated-risk investing will mean that you get the best of both worlds and are able to reap the rewards of profitable investment.

SEE: What Is Your Risk Tolerance?


The Bottom Line
Encouragingly, there are positive signs appearing among younger women. Young women are more engaged in planning their financial future than women from older generations. One of the most important things women can do is take charge of their retirement immediately. They should find out as much as they can. How much will they need to live on? What sources of income are already available to them? They should talk to their spouse (if they have one), find out about current and past employers, and check on their Social Security benefit. Even if they are worried what the answers might be, it's better to find out now than waiting until they're ready to retire and discovering bad news then. Starting to plan early gives you options later in life. Retirement is meant to be about reaping the rewards of a lifetime's work – so make sure a plan is in place to make it just that.

Related Articles
  1. Term

    How Traditional IRAs Work

    A traditional IRA is a tax-advantaged retirement account that includes stocks, bonds, mutual funds and other investments.
  2. Retirement

    5 Reasons Millennials Lead in Saving for Retirement

    Say what you want to about millennials but the one thing they are doing better than any other generation is saving for retirement. Here's why.
  3. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
  4. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  5. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
  6. Investing

    7 Creative Ways to Save for an Early Retirement

    Take note of these out of the box steps you can take towards securing yourself an earlier, more comfortable retirement.
  7. Your Clients

    Tips for Making Your Nest Egg Last Longer

    If you’re trying to figure out how to make your hard-earned nest egg last, there’s one piece of advice that stands above the rest.
  8. Personal Wealth & Private Banking

    What People Hate About Financial Advisors

    Advisors need to make a living too, but doing so by cutting corners at a client's expense isn't right. Here are the top complaints against advisors.
  9. Retirement

    When to Fire Your Advisor and Go Robo-Advisor

    Human financial advisor or robo-advisor: Which suits your needs best? Here are some general tips to help guide you to the right professional.
  10. Products and Investments

    Should Leavers Roll Over 401(k) Assets or Not?

    More and more companies are urging soon to be retirees to keep theirs assets in the company 401(k) plan. Is this a good idea?
RELATED FAQS
  1. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  2. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  3. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  4. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  5. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  6. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
Trading Center