Statistically speaking, early retirement has long been a man’s dream. It is very difficult for a woman to achieve early retirement. To retire early, women literally need to be twice as good as men. We’ll show why this is the case, exactly how bad is the gender gap, and offer three actionable choices women can take to increase their chances to achieve early retirement.
Why Early retirement for women is virtually impossible
Early retirement for women is statistically speaking twice as hard to achieve as it is for men. Here’s why:
- Women make less money. Women make on average 23% less than men for the same job.
- Women’s earnings growth plateaus sooner. Men’s income peak at the age of 50 while women’s peak at only 35. Can you believe it? Men have 15 more years to grow their earnings!
- Women live 2 years longer than men. Plainly told, it means there is simply more years women need to save for.
Women do save a bit more than men, and I really mean only slightly. But the wealth gap ascribed by the three points above is simply too wide to close. Think about it: if a man earns 60% more at his peak (see chart below) and he does it for 15 more years, how is it even possible for a woman to catch up? This is not simply a matter of leveling the playing field, this is oceans apart and living in two different worlds.
Critics will of course counter argue the following points:
Much of this wage gap can be explained by women starting to have children and quitting jobs to raise them. The question remains: how come only women’s career suffer when a child is supposed to have two parents?
And here’s something even more interesting: although one of the worst career choices a woman can make is to have children, it is actually the exact opposite for men: men get more respect when they become fathers.
However, children do not explain everything. Women who never had children from the same MBA schools earn less than their counterpart. Perhaps this is because women negotiate salaries relatively less frequently. But when women do negotiate, people trust them less and no longer want to work with them. Women just can’t win.
Big choices to consider for women to achieve early retirement?
1. Get married, and marry well: estimated to increase wealth by 50%
The reality is that we don’t live in a world of men versus women, we live in a world of families.
Married women are twice as wealthy as single women not only because they get to share the wealth earned by their male (or female) counterparts, but because a family structure creates stability that then helps people to focus on finance.
So unless you are determined to stay single forever (and mad respect to you for making this personal choice), take finding a mate seriously: it’s not enough to land a great job, you need to also land a great partner.
While getting married can save you money, getting divorced will cost you even more.
This brings us to the second point: marry well and marry once, if you can. Marrying rich is a fairy tale: it rarely works out. Unless you too come from money, marrying someone of a significantly different economic class posts all sorts of challenges that likely.
Instead, find a partner who wants what you want. If you are a career woman, you’d want to marry someone who is willing to do laundry and share the burden. If you want to retire early, you’d want to find a financially responsible person who is willing to delay gratification and ruthlessly prioritize savings over material things.
2. Put half of your income into savings: estimated to increase wealth by 25% to 50%
Retirement planning for women requires radically different savings plan. Saving 50% of your income should be a source of pride, a healthy way of life.
Women on average save less than 10% of their income, not nearly enough for any sort of retirement. Our society places particularly intense pressures on women to define themselves through material purchases. Many women believe they need to spend to look good. The savviest women know that’s not the case. The savvy ones make wise decisions to spend as little as possible while looking totally presentable for every occasion. Be a savvy woman.
3. Find a career that focuses more on hard skills and less on face time: estimated to increase wealth by 25% to 50%
Women needing flexible hours during child-rearing years is the primary contributor to her career stalemate.
Prominent research supports this theory and suggests that flexible hours could make for greater gender equality in the workplace. Having flexibility in your hours could mean two things: either you are completely replaceable (a service person at McDonald’s) or that you have control of your own hours (a biology researcher).
In fields like HR, marketing or client-heavy business sectors – face time is valued. These are the careers that tend NOT to provide flexibility in hours. The woman needs to meet with clients at predetermined times and often must show her face to get things done.
But in STEM fields, there is often a deadline to deliver a (rather technical) project, but there is less rules around the exact working hours. It is not a surprise, then, that pharmacists and accountants are the the two fields where there is virtually no wage gap between men and women.
Keep this in mind as you develop and grow your career: worry about not only how much you make today, but how much control do you have over your own hours.