May 16, 2018
$1,055,000—THAT’S HOW MUCH LESS a woman could earn over her lifetime, on average, compared with a man in a similar full-time position, assuming that she takes career breaks to provide care for her family.
The ripple effects of the wage gap and the cost of caregiving, both of which contribute to that million-dollar deficit, are fairly well known. Three other factors are less well-known, however: the investing gap, the debt gap and the retirement gap can compound the financial challenges that many women face. Those are among the findings of Women & Financial Wellness: Beyond the Bottom Line, a new study by Merrill Lynch, in partnership with Age Wave.
Beyond these statistics, of course, there are other more positive stories to tell: Some younger women, in particular, have made great strides, with many out-earning men their age in similar jobs in a few specific fields,1 and single women today are the second largest group of homebuyers.2 By 2020—just two years from now—women are expected to control $22 trillion of wealth in the U.S.3
Most men talk about money a lot, at the office or the gym. Women, not so much.
And yet, because women live longer, they are at greater risk of outliving their money. Only when you fully understand the financial implications of the wage gap, of taking career breaks, of living longer and of facing higher health costs, can you prepare to deal with them. There are things you can do to help bridge those gaps. Below are a few tips to consider.
We need to talk. Most men talk about money a lot, at the office or the gym. Women, not so much. In fact, 61% of the women surveyed for the Merrill Lynch/Age Wave report said they’d rather talk about their own death than about money—and 60% felt they didn’t know enough about investing to begin. “Just start talking about investing and your financial goals with other women,” says Lorna Sabbia, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch. “Talk generally leads to action.”
The investing gap. Despite their reluctance to talk about investing, it turns out women’s biggest financial regret is “not investing more,” says the Merrill Lynch/Age Wave report. Women feel less confident than men do about investing, by a margin of 52% to 68%,4 and as a result 71% of their assets remain uninvested, compared to 60% for men.5 Financial education builds confidence, suggests Sabbia. “Enroll in an online class, consult with an expert—whatever works best for you,” she says. “But don’t feel you have to be perfect, or know everything, before you begin investing. Just get started.” When women do invest, Sabbia adds, studies show that they tend to see higher returns, in part because they don’t buy and sell as frequently as men do and so avoid higher fees.6
Don’t feel you have to be perfect, or know everything about investing, before you begin. Just get started.
The wage gap. The fact that women, on average, earn 82 cents for every dollar a man in a similar job earns is well known—but its long-term implications are not.7 “That 18-cent difference adds up over time,” says Maddy Dychtwald, co-founder of Age Wave. Future raises and even Social Security benefits are lower as a result, and career interruptions to care for family take an additional toll. One thing that can help is asking for what you’re worth on your first job—and every one after that. The larger your paycheck the easier it is to invest some for your future. (Men, by the way, are eight times likelier than women to hold out for more money when receiving a job offer, according to research conducted by Linda Babcock, a professor at Carnegie Mellon.8)
The debt gap. Women hold about two-thirds of the student loan debt in the U.S., and, because of the wage gap, it can take them two years longer to pay off their loans, according to a 2017 report from the American Association of University Women.9 Talk to your advisor about consolidating your debt, suggests Sabbia. And check to see if you qualify for a federal repayment plan, which can cap monthly debt payments at 10% to 15% of your discretionary income.
The retirement gap. Women retire an average of two years earlier than men, with less in savings, notes the report. Women’s longer lives—and higher health-care costs—make it all the more important for women to start saving and investing early for retirement. Sabbia urges women to “familiarize yourself with resources, such as 401(k)s and Health Savings Accounts, that can offer tax advantages as you work toward building a more secure future. And develop a smart strategy for maximizing your income when you claim Social Security.”
Most important, she says, “Find an advisor who understands women’s different life journeys—who really gets how things like the wage gap and career breaks can impact your progress toward your goals. And work those assumptions into your retirement projections.
For more insights to help you bridge these gaps, download your copy of "Women & Financial Wellness: Beyond the Bottom Line" here.
1 “When Women Outearn Men,” Liberty Street Economics,
August 5, 2015.
2 Home Buyer and Seller Generational Trends Report 2017, National Association of Realtors Research Department.
3 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
4 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
5 Global Investor Pulse Survey, BlackRock, 2016.
6 “Despite Setbacks, Women Investors Outperform Men,” US News and World Report, May 18. 2017.
7 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
8 Women’s Student Debt Crisis in the United States, American Association of University Women, 2016.
9 Women’s Student Debt Crisis in the United States, American Association of University Women, 2016.
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