The Unexpected Truth About Women and Investing

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Women tend to live longer but earn less, putting them at a big disadvantage when it comes to retirement. Find out how you can beat the statistics. [[{“value”:”

It’s never easy to talk about unexpected truths because we all have different expectations and ideas of what is true. For example, you may or may not be surprised to learn that women’s portfolios often outperform men’s. Or that almost half the women in one survey said they aren’t sure how to invest.

Sadly, one all-too-expected truth about women and money is that we have less of it. You can thank the gender pay gap and career interruptions for that. Let’s dive into some truths about women and investing and what you can do about them.

1. Women get better results when they invest

Research by Fidelity looked at the results of over 5 million customers over a 10-year period. It found women’s portfolios performed 0.4% better than men’s. Several other studies show the same thing.

More good news? The number of women who are saving for their retirement is on the rise. Fidelity’s research shows that 68% of women were putting money aside for retirement in 2023. This is up from 66% in 2019.

What this means for you

It’s certainly reassuring to know there are more female investors, and that they do well. Even so, if you’re nervous about investing, you’re not alone. You don’t need a degree in finance to invest. In fact, it may well be easier than you imagine. Try looking for podcasts and books that speak to you — there are more and more of them around. You could also check out this beginner’s guide to investing.

I used to think I needed to be able to analyze stocks and understand charting tools before I could invest. I was wrong. If you don’t have the time (or the desire) to learn how to evaluate stocks, you could instead buy an exchange-traded fund (ETF) or index fund. For example, an S&P 500 index fund will give you exposure to the top 500 companies in the U.S. This is a relatively low-risk way to build a diversified portfolio.

2. Women have less money to invest

On average, women will earn less in their lifetimes than men. This makes it harder to put money aside in a savings account and hampers their ability to invest for the future. Women earn about $0.83 for every $1 a man earns, per data from the Bureau of Labor Statistics.

On top of this, women are more likely to take time out to care for children. Indeed, 44% of women told Fidelity they are caregivers in one way or another. Research by the Urban Institute estimates the average cost of providing unpaid care to children, parents, and others at $295,000 over a lifetime.

What this means for you

We can push for greater wage transparency and equal wages. Unfortunately, none of us can single-handedly change the gender pay gap. One way you can make the most of any money you do invest is to use tax-advantaged accounts. It won’t fix gender inequality, but it could give you a bit more in your bank account in your twilight years.

Find out if your company has a 401(k) plan. Talk to your HR department to find out how it works and how you can contribute. 401(k)s can be a double win — not only are there tax benefits attached to them but many companies will also match the money you put in.

It’s also worth understanding how individual retirement accounts (IRAs) work and which account makes sense for you. Some will save you money on your taxes now, while others let you make tax-free withdrawals in your old age. Most top stock brokers offer different types of IRAs.

3. On average, women live longer

The Centers for Disease Control and Prevention puts the life expectancy for women at 79.3 years and men at 73.5 years. You might assume that living longer is a good thing. It is. The challenge is how you can do it comfortably, particularly if you need to cover medical and care bills.

Put simply, many women will retire with less money and need to stretch what they have for longer. Census data shows that almost half of women aged 55 to 66 have no personal retirement savings. If you live to be almost 80 or more, it may be hard to stay afloat financially if you don’t have money put aside.

What this means for you

Whatever age you are, the sooner you start planning for retirement, the better. Think about what kind of life you want to have and plot out some of the costs involved. Check out this retirement planning guide for more information. Putting finances to one side, healthy eating and regular exercise can go a long way to reducing health issues further down the line.

If your retirement savings aren’t where you want them to be, it can feel like you’re at the bottom of a steep mountain. Don’t let that put you off. Sit down with your budget and see if you can save even a small percentage of your income. Some financial advisors suggest putting 10% to 15% toward retirement. If that feels impossible, perhaps you could start with 1% and build from there.

Key takeaway

The financial deck is stacked against women, particularly when it comes to old age. We earn less, are more likely to take time out to care for others, and may well live longer. It is all too easy to get disheartened and wind up doing nothing. Instead, focus on the steps you are able to take. Set yourself achievable goals and celebrate when you reach them.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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