Do today's young female professionals face the same retirement-savings burdens as their mothers? They have more income potential and flexibility—don't they?
It's an important question to resolve, both on an individual basis and as a societal challenge. While the 79 million-strong boomer population undoubtedly requires retirement income advice pronto, there are another 70 million Americans right behind them: Generation X. And they should already be well on their way toward saving and investing.
[See Where to Invest in 2012.]
Gen-Xers were born between 1965 and 1976; some researchers consider those born between 1977 and the end of 1981 a subset called "Young Gen-Xers." Many of their investing issues cut across the sexes, but women face unique challenges.
Although scarred by the recession, credit crisis, and ensuing bear market (which is now apparently stabilizing), most professional women in their 30s and 40s are increasingly proactive when it comes to their finances, at least according to select research and anecdotal evidence (consider the rise of female-specific personal-finance television programming and blogging, for instance.)
Unlike most of their mothers, Gen X daughters are competing directly with men for more of the same jobs. The higher-education disparity between the genders has narrowed, and women are becoming savvier consumers when it comes to their own portfolios.
But is that enough to effectively and quickly close a gender investment gap that the Equal Rights Amendment-era generation helped shrink?
Earnings divide. Gen X women do face an uphill climb. That's primarily due to a lingering, though narrowing, earnings divide. In 2010, women across the broad labor force earned roughly 80 cents for each dollar that men earned, according to the U.S. Bureau of Labor Statistics. Even in professions like nursing and personal-care services, which have traditionally attracted more women than men, women still earn only about 83 to 87 percent of what men earn.
Similar patterns remain true even in higher-level positions such as management, or higher-paid jobs such as surgeons, according to Labor Department data. Women tend to make salaries more comparable to men in areas where "knowledge and research" are a primary industry (college towns, for instance, over manufacturing bases).
Other statistics show a gender difference in job-related investment. A recent survey by the Transamerica Center for Retirement Studies reveals that 70 percent of women polled have access to a workplace retirement plan, compared with 79 percent of the men. The gap exists because more women than men tend to hold positions below full-time status, often opting for flexible schedules to take care of children or other family members.
Even when women are taking advantage of workplace or outside retirement plans, the median account balance for women is about 64 percent that of men, says The Vanguard Group.
The Insured Retirement Institute says its recent data collection still shows some deficiencies among Gen X women in a full understanding of their retirement situation. One-third of female Gen X-ers (married and unmarried, combined) were uncertain about the amount of money they had saved for retirement. Past IRI research shows that women are very highly involved in the management of household finances. This is an indication that greater attention needs to be paid to retirement savings, the group says.
Pensions are past. Gen X-ers will also need to rely more on investment acumen than Americans in earlier generations, the IRI suggests. According to the Employee Benefit Research Institute (EBRI), only 15 percent of today's workers are covered by a defined benefit plan. Additionally, IRI research shows that 56 percent of Gen X-ers expect their 401(k) plans to provide a major source of retirement income, thereby requiring investment expertise to make the plan's value stretch over more than two decades of retirement. Special attention must also be paid to Gen X-ers who are not married and those considered "middle-income" to address their financial needs for retirement. These groups tend to have less money saved for retirement, and are the most likely to have used their savings for present needs, the IRI says.