7/11/2018

Why Women Need to be Twice as Smart About Money

Gender pay gap, “pink tax” hinder women's ability to save

By Dena Zocher
Freelance Writer

According to the U.S. Department of Labor, as of 2017 women make up nearly 47% of the American workforce. In 2016, more than 40% of women in the labor force have college degrees, compared with just 11% in 1970.1

Over time, women's gains in numbers and education have changed the dynamic of the workforce. But, while women continue to make advances in society and the workplace, that doesn't begin to tell the whole story.

The gender pay gap
The not–so–good news is women still earn less than men. This gender pay gap is expressed as the difference between men's and women's median earnings. In 2016, American women working full time typically were paid just 80% of what men were paid–a gap of 20%.2

What are the lifelong financial effects of this pay inequity? Let's consider a hypothetical story about a woman we'll call Janine. Janine and her male counterpart, Dereck, are smart, educated go–getters. They're the same age, graduated from similar colleges, with equivalent degrees.

Let's say they both get hired to do the same job and start on the same day at the same company:

  1. Dereck and Janine each begin investing for retirement at age 30.
  2. They follow parallel career paths, earning 3% annual pay increases.
  3. Both diligently invest 15% of their annual salaries, receive 8% returns on the same investments, and never withdraw any money for more than 35 years.
  4. When both workers retire, Janine has around $2 million saved for retirement–but Dereck has more than $2.5 million.3

That's the harsh math of the gender pay gap over the course of a career.

“Not only is a woman likely to be paid less than a man in the same line of work, but she'll also have to pay more for things such as clothing and personal–hygiene items. Over the course of a career and a lifetime, these inequities are a drag on a woman's ability to save.”

The “pink tax”
Women don't just get paid less for their work–they get charged more. Products marketed to women are often sold at a higher price point. This extra expense is often referred to as the “pink tax.”

Whether it's razors, dry cleaning or personal–hygiene items, women pay more for gender–specific products than men, studies show. On average, products for women or girls cost 7% more than comparable products for men and boys. For example, women pay more for clothing than men; clothing for girls costs 4% more than boys' clothing. Women's personal–care products also cost 13% more than men's.2

A study from the state of California found that women, on average, pay about $1,351 annually in extra costs for similar goods and services.4 Over the course of 50 years, that adds up to a hefty $67,550.

Not only is a woman likely to be paid less than a man in the same line of work, but she'll also have to pay more for things such as clothing and personal–hygiene items. Over the course of a career and a lifetime, these inequities are a drag on a woman's ability to save.

And that's why women must be extra wise about money and twice as smart when it comes to financial literacy.

Experience the #retirementyouwant – find out more at www.jackson.com

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The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete. Dena Zocher is not affiliated with Jackson National Life Distributors LLC.

Information in this article is summarized from these sources:

  1. Filed in By Mark DeWolf on March 1, 2017. (n.d.). 12 Stats About Working Women. Retrieved November 06, 2017, from https://blog.dol.gov/2017/03/01/12–stats–about–working–women
  2. AAUW (Fall 2017 Edition). The Simple Truth About the Gender Pay Gap. Retrieved November 06, 2017, from https://www.aauw.org/aauw_check/pdf_download/show_pdf.php?file=The–Simple–Truth
  3. This example is hypothetical and for illustrative purposes only. The rates of return express equal annual 3% salary increases, equal investments of 15%, and equal growth rates of 8% during the same 35–year timeframe. 15% income savings suggested by Anita O'Shea Nerdwallet.com, “3 Reasons Why Women are Better Investors than Men,” December 26, 2015.
  4. Hill, C. (2016, April 12). “6 times it's more expensive to be a woman.” Retrieved November 06, 2017, from https://www.marketwatch.com/story/5–things–women–pay–more–for–than–men–2014–01–17

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