Even if the markets have started to recover from the COVID-19 recession, many individuals are still trying to understand the financial damage the recession may have caused to their savings and their retirement plans. Women, in particular, were harder hit by the impacts of this recession. If you are one of these women, and you’ve been spending time during lockdown researching investment plans to get you from your new reality to a future you look forward to, you’re not alone.
Even if the markets have started to recover from the COVID-19 recession, many individuals are still trying to understand the financial damage the recession may have caused to their savings and their retirement plans. Women, in particular, were harder hit by the impacts of this recession.1
If you are one of these women, and you’ve been spending time during lockdown researching investment plans to get you from your new reality to a future you look forward to, you’re not alone. The financial planning journey begins with understanding the differences in how men and women accumulate wealth over time, the unique pressures women face, and how they can diversify their investments and increase their confidence in planning for funding later life.
Beyond the Pay Gap: The Wealth Gap
Not only do women typically earn less than men over time, they can also face a series of other financial challenges unique to their gender:
- Longevity is a factor for everyone in financial planning, but even more so for women, who outlive their male partners by an average of five years.2 By age 85, women outnumber men two to one, and 77% of people whose spouse has died are women.3 Furthermore, 81% of centenarians are women.4 Increased longevity means increased healthcare expenses. The average woman will have 39% higher health costs than the average man in retirement.5
- Caring for elderly parents also poses a major financial challenge to women. Two-thirds of care provided to older adults is done by women.6 Time taken away from work to care for aging adults limits opportunities for earnings and career advancements.7 In addition, the average female caretaker spends an average of $7,000 per year on her care recipient.8 This is money that could be invested, where there is potential for growth.
- Mothers also experience a pay gap and time gap not experienced by fathers. Mothers of young children reported a 70% greater increase in time spent on household work (childcare, housework) compared to the increase reported by men, even when both parents work.9 This leaves less time for financial planning and management during critical earning years. Of those mothers who return to the workforce, their earnings fall following childbirth and don’t recover until the child is 9 to 10 years old.10
- Finally, the pay gap means that women have less to invest in retirement planning accounts, such as 401(k)s. Investing less from the start can mean missing out on a significant amount of potential investment earnings by the time women reach retirement age.
In the Mix: Diversifying Investments for Lifelong Confidence
Given that women experience a wide range of challenges and milestones unique to them, they may need a range of investment opportunities to meet their diverse needs and to provide greater protection in future recessions.
While women can easily feel the pressure of having to plan for more expenses with less earnings, annuities can relieve some of this pressure by providing protected lifetime income. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity. Guarantees are backed by the claims paying ability of the issuing insurance company.
- Annuities are tax-deferred investments, meaning that you do not pay taxes on your earnings from annuities until you make withdrawals. This lets you keep more of your money in the market, allowing any earnings to accumulate over time.
- Annuities also offer the option to be passed on to your family. A guaranteed death benefit ensures the loved ones you’ve taken time to care for can have the opportunity to add to your legacy.
Making sure you’ve diversified your portfolio appropriately for your personal situation can feel intimidating at first, but you don’t have to be alone in this journey.
*What is an annuity?
Annuities are long-term, tax-deferred vehicles designed for retirement. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met.
1. “Employment Situation Summary,” U.S. Bureau of Labor Statistics, June 2020
2. “Mortality in the United States, 2017,” National Center for Health Statistics, November 2018
3. “Women and Financial Wellness: Beyond the Bottom Line,” Merrill Lynch, 2019
9. "Six Facts About U.S. Moms,” Pew Research Center, May, 2019.
10. "The Return to Work Syndrome: The Unique Challenges Women Face Reentering the Workforce,” Talent Management and HR, July 2018
Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, annuities are issued by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York). Variable products are distributed by Jackson National Life Distributors LLC, member FINRA. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact the Company for more information.
Jackson® is the marketing name for Jackson National Life Insurance Company® and Jackson National Life Insurance Company of New York®. Jackson National Life Distributors LLC.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.
Tom Hurley and Phil Wright are affiliated with Jackson. All other authors are not affiliated with Jackson.