“I know this is probably the last thing on your mind right now,” said the bubbly, middle-aged HR rep as she handed me a packet explaining the company’s 401K plan.
I was 22. I’d just landed a full-time magazine job after watching my savings dwindle over the previous seven months, while feverishly applying everywhere and working part-time hours at minimum wage to cover my expenses. The bump in pay would mostly go toward the $700 per month I needed to take the train to work and to pay the minimum on my student loans. Retirement felt like just another chunk out of an already meager paycheck.
“It seems far away,” she added. “But the sooner you start saving, the easier it is when you’re my age. It’s really important to start saving now, especially as a woman.”
Those last words seemed out of place then.
The wage gap is larger than you think
The wage gap has narrowed considerably: recent reports show that college-educated women in their 20s now earn 97 cents for every dollar earned by men — a huge advance in the decades-long fight for equal pay.
But even that small percentage, compounded out 40 years to retirement will amount to a large difference.
Furthermore, that 3-cent gap is temporary. By the time those same college-educated women hit their mid-30s, they are back to earning 15 percent less than their male counterparts. And this gap continues to grow as we get older.
In other words, even women who have been diligent about contributing to their retirement accounts have to save at twice the rate as their male colleagues to ensure the same level of funds in retirement, thanks to the wage gap.
Women live longer than men
Today, a female at age 65 can expect to live another 20 years, two more years than a male of the same age.
That means a woman with a salary that is equivalent to her male coworkers, who never leaves the workforce (temporarily or permanently), and who starts saving from her first day on the job, is still more likely to fall short compared to her male colleagues because she’ll have to make her savings stretch 10 percent further.
You will quite literally have less money and more years to make it last.
Women are more likely to work jobs that don’t qualify for a retirement plan
When life’s non-work demands creep up, women are more likely than men to switch to part-time jobs, unpaid work, and take time off from work altogether to serve as a caregiver for children and ill or elderly family members. That means, in addition to having little money to put toward retirement, they are also missing out on boosts like employer matching and stock purchase plans that make saving for retirement easier and more effective.
Even with a low matching rate and meager income, I still saved twice as much yearly with my employer plan than I did in 2015 – my first year as a freelancer. Though I’ve wised up in my second year of self-employment, it is easy to see how many women — especially those in part-time or unpaid roles — find themselves short on savings.
Lesson: Without employer help or equal wages, and with an extra couple of years to make your money last, women need to stay that much more responsible and aggressive with their savings.