Stefanie O’Connell, millennial money expert and author of The Broke and Beautiful Life, is regularly sought for her financial advice, and she has built her personal brand on empowering women to shape their own financial futures. Essential to that future planning is investing in retirement, but because of the gender pay gap, putting money away for retirement can be harder for women than men.
“The gender pay gap is an obvious contributor to the gender retirement savings gap,” O’Connell said. “The less money you make, the more your paycheck is consumed by essential living expenses and the less money you have to set aside for retirement.”
If women have less money for their living expenses, their employer contributions are also likely to be less. “Add onto that the fact that future raises are often determined as a percentage increase in pay, and this one measure of gender inequality, the wage gap, can compound into greater and greater wealth inequality,” O’Connell said.
O’Connell said that, although inequality is the thing most in need of correction, there are things women can do to maximize their financial situations. “While the primary onus should be on legislators and employers to adopt policies that level the playing field, women can better position themselves by remaining active in all aspects of their financial lives,” she said. “There’s a lot more to money than earning it. If we dedicate time to managing the money that we make, we’re far more likely to be able to maximize it.”
When it comes to saving for retirement, O’Connell had a wealth of advice. “Utilize tax advantaged retirement accounts,” she said. “Tools like 401ks, IRAs, ROTH IRAs and HSAs can help you save for your future while getting a tax break, either now or when you withdraw the money in retirement.”
O’Connell also recommended automating your savings. “If you have an employer sponsored retirement plan, you can probably have your retirement fund contributions automatically deducted from each paycheck,” she said. Lastly, she suggested saving raises. “As you start to earn more money, try increasing the percentage of your salary you contribute to your retirement accounts. That way, you can continue increasing your savings without feeling like you have to sacrifice your lifestyle.”
The COVID-19 pandemic has left millions of Americans in a state of financial uncertainty. While acknowledging the difficulties, O’Connell said this is a good time to review your finances. “Review your spending to determine what expenses can be reduced or eliminated, even if only temporarily, to help you achieve your monthly savings goal,” she said. “Maybe you can negotiate a raise or start a side hustle so that you can dedicate all additional funds to your savings goal. This kind of specificity can help ground your big goals in specific behavioral changes and tangible financial outcomes.”
“This is also a good time to review all of your expenses and figure out exactly where your money is going — cutting out things you don’t need and reducing costs wherever possible so you can either cover your essential expenses, or build your emergency savings if you still have a regular income,” O’Connell said. “There’s a lot of uncertainty, and yes, a lot is outside of our control. But we can try to find some grounding and peace of mind by identifying and leaning into what we cancontrol.”