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Women Business Owners Approach Saving for Retirement Differently

August 09, 2019

Our second annual Retirement Gap Study reveals that when it comes to saving for retirement, women business owners differ from their male counterparts in a number of important ways.

When to start saving for retirement

Women who either own or lead businesses start saving for retirement later than men. Around 91% of men who responded to our 2019 survey revealed that they started saving for retirement and contributing to their retirement funds before they turned 40 years old. Only 82% of women said they started saving and contributing before the age of 40.

This is an important data point because the earlier we start saving, the more time our money has to grow.

Although it is commonly understood that it is ideal to start saving as early as your 20s, neither group fared well here. Only 13% of men and 5% of women reported that they started investing in their retirement by their 20s. 

A new report from the Federal Reserve indicates that young people today are also not adequately preparing for retirement. Young workers aged 18 to 29 are less likely to have savings, with 42% saying they have nothing stashed away.

Different savings vehicles

Our study also shows that women save for retirement differently than men. Women business owners and leaders are more likely to save money in a personal savings or money market account than men are. In fact, 66% of women and 54% of men relied on savings accounts to plan for retirement at some point in their career.

While it is clearly preferable for women to use savings accounts than not to prepare for retirement at all, they are missing out on the tax benefits and higher rates of returns offered by retirement plans like 401(k)s.

More male business owners and leaders are participating in 401(k)/403(b)/457 plans to prepare for a financially secure retirement; 92% of men compared to 80% of women. Why are women investing at lower rates than men? There is much evidence to suggest that women are more risk adverse when it comes to investing. One theory is that that lower earnings from smaller paychecks result in a more conservative approach, as women try not to lose what little they have. However, there are a number of compelling reasons for women to be more aggressive including longevity and the risk/reward tradeoff.

Women try to save by spending less

For 47% of the women business owners and leaders who participated in our study, a key mechanism for saving is practicing conservative spending habits. This was true for only 30% of male respondents. While setting and keeping a budget is important for everyone, cutting back on spending is not sufficient as a retirement savings mechanism unless money not spent is contributed to a 401(k)/403(b)/457 plan that will deliver a higher return than money in the bank.

Practicing conservative spending is a daily reality for business owner Amy Woidtke who has owned a company that helps people declutter since 2008. “Making enough money to put aside for retirement is a major challenge. So, I am managing my monthly personal and business expenses very carefully,” she said. Amy limits her monthly expenses to one or two dinners at a restaurant each month and a rare low-cost weekend away.

Tips to combat the retirement gap

In order to help combat the retirement savings gap, we’ve developed a few tips for both women business owners and women in general:

For Women in General:
  • Stay informed about how much money you'll need in retirement.
    • Women generally live longer than men. Make a plan with a financial advisor based on the likely chance you may live to 90 or older.
    • Seek out up-to-date advice from colleagues, financial advisors, and education materials.
    • Estimate savings needs with an onlione calculator.
  • Consider retirement benefits when evaluating employment opportunities.
    • Find out how much your employer will match and contribute to the limit if possible.
    • If you’re planning on supporting dependents, make sure you have the ability to work from home to negate career gaps.
If you’re a Business Owner or Leader:
  • Offer flexible employment hours and structures.
    • This includes the ability to work from home or have a flexible work schedule to negate career gaps for supporting dependents.
    • Allow workers to phase into retirement by offering flexible work arrangements and allowing for a transition from full-time to part-time and/or working in different capacities.
  • Stay updated about the retirement gap.
    • Join in on the conversation with colleagues about what they're doing to save.
    • Share wins and challenges.
    • Speak with a financial advisor.
    • Read our annual study, and others like it, to see how you compare.

The 2019 Retirement Gap Report offers many more insights into differences between the way women and men business owners and leaders save for retirement.  Get the full report by following the button below:

Full Report

At LRS, we are leading the retirement preparedness conversation with and for women business owners and leaders. We are tackling the retirement preparedness gap with data driven financial and saving solutions. Most importantly, we want women business owners and leaders to feel financially empowered; they are centers of influence and have immense opportunity to help their employees do the same.

If you'd like to contribute to this year's Retirement Gap study you can take our survey here!


For more tips and information regarding retirement plans, contact us.

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This piece is part of our ongoing Retirement Gap research. For more information you can find our most recent study by following the link below.

Full Report

If you would like to contribute to next year's study, you can find our survey here.

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