Understanding the Gender Investing Gap

When it comes to investing, more women are stepping up to the plate. According to a 2021 Fidelity Investments analysis, over two-thirds of women are investing outside of retirement, a significant increase from 44% in 2018. Interestingly, women have been found to outperform men in investing by 40 basis points. Despite these encouraging trends, the gender investing gap remains a significant issue.

The gender investing gap, much like the gender pay gap, works against women. Research from George Washington University indicates that women’s financial literacy around investing tends to lag behind men. This is crucial because financial literacy and confidence are both linked to stock market participation. Typically, women invest less often than men, which can greatly impact their financial preparation for retirement.

Impact on Women’s Retirement

The gender investing gap can make it harder for women to build their nest eggs. Caregivers, who are predominantly women, may intermittently reduce or pause their retirement contributions. The general rule of investing is to add to retirement funds early and often to maximize the power of compound interest. Beyond that, they could be cutting themselves off from an employer match, which is essentially free money.

Women are more likely than men to have no retirement savings at all, according to the U.S. Census Bureau. Vanguard retirement plan data also found that average and median retirement account balances are almost 44% higher for men. This research focused on defined contribution plans like 401(k)s. Of course, investing isn’t limited to only retirement accounts. The gender gap can also apply to other investment vehicles, like brokerage accounts and health savings accounts (HSAs).

There’s one other important retirement consideration for women: They have a longer life expectancy. That means they’ll likely need to save more to fund a longer retirement. This is all to say that women may be at higher risk of outliving their money.

How to Get Started With Investing

Now for some positive news: Whether you’re getting a late start with investing or just looking for ways to boost your financial portfolio, it’s still possible to grow your wealth. Here are a few simple ways to begin:

Enroll in Your Workplace Retirement Plan

This can help simplify investing. With a 401(k), for example, you simply choose a recurring contribution amount to be automatically taken from your paycheck. A 401(k) also offers nice tax benefits, like tax-deductible contributions. Your employer might also match some or all of your contributions.

Open an Individual Retirement Account (IRA)

Unlike an employer-sponsored 401(k), an IRA is an investment account you can open and fund on your own. Both Roth IRAs and traditional IRAs offer unique tax breaks.

Consider a Robo-Advisor

If you want to invest beyond dedicated retirement accounts and prefer being more hands-off with investing, you can look into a robo-advisor. It’s a platform that uses algorithms to automatically select investments on your behalf based on things like your age and risk tolerance.

Explore Series I Bonds

Bonds in general are considered low-risk investments. Series I bonds stand out because they use two interest rates—one that’s fixed and another that’s indexed for inflation. Series I bonds purchased until April 30, 2023, have a guaranteed return of 6.89%.

Choose the Right Investment Strategy

There are lots of asset classes and investments out there. The right ones for you will depend on your financial goals, risk tolerance, and age. No matter what you choose, properly diversifying your portfolio is key because it helps spread out investment risk.

The Bottom Line

The gender investing gap can hold back women investors, especially when it comes to retirement. Knowing what it is and how to overcome it is an important part of leveling the playing field. At O1ne Mortgage, we are committed to helping you secure your financial future. Whether you need advice on investing or are looking for the best mortgage services, we are here to help.

Contact O1ne Mortgage today at 213-732-3074 for all your mortgage service needs. Let’s work together to build a brighter financial future.