Vanguard: Lower Earnings, Less Time in Workforce Among Reasons Women Should Save More

April 13, 2018 — 1:16 PM EDT

Everyone should be saving for their retirement, but Vanguard is making the case as to why women need to save more.

Take women's years in the workforce for starters. According to Kelly McShane, an investment analyst in Vanguard's Investment Strategy Group, women are more likely than men to take time off to raise children or care for an elderly loved one. What's more, McShane said that women tend to retire earlier than men, which means they have less time in the workforce and thus less time accumulating wealth for their golden years. By saving less, women don't get the full benefits of compounding and could end up with a lower portfolio value over the long run.

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This is not to mention that, while the wage gap between men and women is narrowing, it's still alive and kicking. McShane pointed to a recent U.S. Bureau of Labor Statistics study that found working women in full-time positions earns about 81% of what a man in the same role earns. "That means if a woman saves the same percentage of income as a man in a similar position, she'll be saving a smaller dollar amount. Saving less can diminish the benefits of compounding and lead to a much lower portfolio value over the long term," she wrote in a blog post.

On top of that, women tend to live longer than men, resulting in the need to bankroll a longer retirement, which will mean it is more expensive. The Social Security Administration, pointed out McShane, said that a woman who hits age 65 today can expect to live until age 87 on average. Many women are surpassing that, which means they could spend more time retired than during their working years. The longer you live, the more chances there are of a costly illness or accident. "While there are obviously benefits to living longer, it's important to plan for the expenses that will come with these additional years. And often these later years are more expensive, as healthcare costs generally rise with age," noted the investment analyst.

While McShane said that women are likely to face hurdles to saving for retirement, there are ways to overcome them by increasing their savings to compensate for lower wages, fewer years in the workforce and a longer retirement. "Overall, a woman who increases her savings and takes advantage of compounding can give herself a much better chance of accumulating the assets she’ll need in the future," she wrote.