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~Discrimination & Longevity are the Main Factors~

This can be a delicate subject, but it's one that my Economics students have appreciated over the years.  

 

For one, females tend to face labor market discrimination, so females' annual wages will, on average, be less than their male counterparts over their working lifetimes.

 

Secondly, females, statistically speaking, spend more time raising children than males do.  This means that females will, on average, spend less time in the labor market than males.

 

This means that females will, all else equal, earn less over their lifetimes and thus will have lower Social Security and/or pension benefits for life.  For example, consider a teacher in the Cape Elizabeth School District with a Master's degree and 5 years of teaching experience who takes three years away from teaching to raise children.  This will result in a cumulative loss of $200,000 in income.  Additionally, if that individual worked a total of 25 years at Cape, this would mean that their annual pension from the Maine Public Employees Retirement System would be $6000 a year less (in today's dollars) for the rest of their lives, just due to the three years they were out of the labor market.

 

 

Lastly, to compound these factors, females, statistically, live longer than males do, so, all else equal, females will require more assets in retirement.  In other words, females are at a greater risk of outliving their retirement assets and are at a greater risk of inflation eating away at the real value of those assets over time.

 

So, it is arguably more critical that females focus on building a portfolio that has the appropriate amount of risk (i.e. long-term growth potential) during their working years and also that the portfolio is appropriately balanced in retirement so that they don't outlive their assets, either due to covering basic expenses or due simply to cost of living increases.  This is another reason why having a well thought out and long term investment plan is important.

 

The good news, though, is that according to a recent study by Fidelity, females tend to be more successful investors than males.  This is, in part, due to behavioral factors.  For example, females tend to have a longer time horizon in mind when investing, whereas males tend to be more driven by the chase for short-term gains, which can lead to excessive trading, higher expenses, and losses.

 

You can read more about the study here:  https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf

 

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August 29, 2023