A recent international study reported that it will take 170 years before women around the globe reach pay equality with men. This study determined exactly how much income is lost when women step out of the workforce.
If knowledge is power, then the hope is that Business Wire’s article, “Millennial Women Face Significant Gender Gap in Financial Wellness,” will help women gain a better understanding of the cost of taking time out of their careers. The 2016 Gender Gap in Financial Wellness Study was done to clarify the financial impact of leaving the workforce on women’s ability to save for retirement.
There’s already a significant retirement gap between millennial men and women. Although pay parity for the typical 25-year-old may be assumed, there’s still a 28% gap in the additional retirement savings required to cover estimated retirement expenses due in large part to women’s longer life expectancy.
Experts estimate that millennial women will need to save about 12.5% of their pay to meet estimated average expenses when they retire. If you add a career break into the mix, the gender gap in financial security becomes that much more significant. Women need to be aware of these numbers so they can take action to minimize the financial impact of important life decisions.
The study indicates that women who take breaks early in their careers will have a potential retirement savings shortfall of nearly $1.3 million dollars. This gap was identified between women who stay in the workforce for their entire careers versus those who take time off for rearing children, taking on charity projects that pay very little, or caring for aging parents.
In addition, it is millennial women who are at the highest risk of falling short because they face longer career spans. Nonetheless, they’re in the best situation to be proactive and plan for any breaks so the breaks don’t end up crippling their finances.
Forty percent of millennial women who participated in a Wells Fargo survey said that they have not even begun saving for retirement. Most expect to take time out during the course of their careers. Millennials may find that, like baby boomers, retirement comes up far faster than they can imagine.
Reference: Business Wire (October 18, 2016) “Millennial Women Face Significant Gender Gap in Financial Wellness”