A need for financial literacy, wellness, and awareness in the United States
From the daily conversations we have with retirement plan participants, we know one thing to be true: financial literacy in our country needs improvement.
We believe financial education needs to start sooner in our classrooms, so the first time a person learns about investments is not when they’re hired for their first job with an employer that offers a 401(k) benefit.
Insights from consultations with women
So far this year in our consultations with female clients, we’ve heard the following statements and questions specifically from women retirement plan participants:
“I’m interested in initiating participation in the plan.”
“I’d like to talk about additional ways to invest more money in 2024.”
“I'd like to find a way to play catch up. I am a bit older than my coworkers, but I didn't start saving until later.”
“I will be retiring in the next five to seven years. I want to maximize the amount I can contribute, and review where my funds are currently.”
These conversations lead us to believe that women are invested in their financial futures.
How women are impacted differently than men in retirement planning
While both men and women need greater exposure to financial education, research shows that women face different challenges than men. These challenges pertain to caregiving, prolonged retirement periods, and healthcare expenses, according to a 2023 Fidelity Investments Study published in October 2024.
“Women shoulder the majority of caregiving duties, which can impact their mental health, career trajectory, and savings potential…almost one in four women caregivers (22%) currently report not saving as much for retirement due to caregiving responsibilities.”
As for extended retirement years, women live an average of six years longer than their male counterparts, meaning “their dollars need to stretch to cover a longer retirement.”
Additionally, “nearly six in 10 women overall still don’t think they’re on track with retirement savings, pointing to a lack of confidence in their financial plans.” Due to their longer life spans, women also need more savings for health care costs as they age.
Did you know?
Despite the fact that women now outnumber men in the college-educated labor force, the gender pay gap, or the difference between the median earnings of men and women, hasn’t changed much for the past two decades. Women typically earn 82 cents for every dollar men earn, according to the Pew Research Center.
9 steps toward financial empowerment
Empowering women with financial literacy is key to fostering confidence and security. It all starts with understanding simple steps that will help you work towards financial security.
Step 1: Establish an emergency fund.
Ensure you have a financial safety net for unexpected living expenses or life events. According to a 2024 Bankrate survey, only 22% of American adults stated they have no emergency savings. It doesn’t hurt to have at least three to six months’ worth of your living expenses in your savings account.
Step 2: Set a financial goal to save at least 5% through your 401(k) plan.
The more you contribute to your retirement account, the more that money can potentially compound over time.
The power of compound interest
Compound growth is the return on your initial principal plus the accumulated growth over time. When there is a return on investments, those returns are reinvested in the account and generate returns on their own. Watch this video to learn more about how compound growth can help you save more for retirement.
Step 3: Develop your understanding of credit.
Make sure you know how to manage credit responsibly and leverage it effectively. According to Experian data from 2023, those with a credit utilization ratio of under 15% generally have a strong FICO score. Credit cards, personal lines of credit, home equity lines of credit, and closed revolving accounts with large balances are a few types of credit accounts that can factor into a credit utilization ratio.
Step 4: Pay down non-deductible debt by creating a budget.
This can help you allocate funds specifically for debt repayment and other future goals.
Step 5: Max out your Health Savings Account (HSA), if applicable.
This can help you prepare for future healthcare expenses while taking advantage of potential tax benefits.
Step 6: Increase your 401(k) contribution annually until you reach 10%.
These small, gradual increases can make a big impact on how much you end up with in retirement. And though it may seem like a lot now, keep in mind that the Bureau of Labor Statistics reported that the overall average for expenses among retirees was $4,345 per month.
Did you know?
Human Interest 401(k) plans come with features like auto-escalation, which automatically increases an individual’s contribution rate at set intervals. This helps encourage less financially proactive individuals to save more for retirement.
Step 7: Save for higher education expenses through a 529 Plan.
A tax-advantaged way to prepare for educational costs can help set you up for a bright financial future post-college.
Step 8: Pay off your home early.
You could potentially save thousands of dollars in interest payments if you pay off your home sooner than expected.
Bonus! Step 9: Get a financial advisor.
A financial advisor is a licensed professional who can help individuals make financial decisions about personal finance matters, estate planning, and investment strategy. If you struggle to make your financial long-term goals, a financial advisor can help you achieve financial stability.
Work towards financial freedom with 401(k) Plan Professionals and Human Interest
There’s no question that women tend to face more obstacles when it comes to saving for their financial futures. But by following sound financial advice, whether it is diligently contributing to retirement accounts, partnering with financial professionals, or diversifying investments, women can increase their chances of reaching financial independence. For more information on how to improve financial well-being, watch one or all of the 8 Steps to Becoming Financially Well videos here.
Article By
Jenna WitherbeeJenna Witherbee is a Retirement Plan Consultant and Investment Advisor Representative with 401k Plan Professionals. 401k Plan Professionals, a partner of Human Interest, is a women-owned business specializing exclusively in the retirement space, encompassing both 401(k) and 403(b) plans.