How Women Business Owners Can Strengthen Their Business and Their Retirement | Schwab - Millennium Trust Company

How Women Business Owners Can Strengthen Their Business and Their Retirement

December 5, 2022
By Millennium Trust

Women entrepreneurs are a driving force in the economy. They were resilient throughout the pandemic, having been disproportionately affected in terms of job loss and family commitments, many still managed to open new businesses and reconfigure existing businesses while balancing the demands of home and work. Women’s success is essential because, post-pandemic, their ingenuity and business savvy are vital to powering the global economy.

High performers despite limited funding

Prior to the pandemic, Boston Consulting Group (BCG) studied the gender gap in entrepreneurship and discovered that businesses founded by women often outperformed those started by men. For example, one study by BCG found that of the businesses it reviewed, those founded or co-founded by women generated on average 10% higher cumulative revenue over a five-year period. Strikingly, the same women-founded or co-founded businesses received an average of less than 50% of the financial investment of those founded by men. The report’s authors calculated that global GDP could rise by approximately 3% to 6%, boosting the global economy by $2.5 trillion to $5 trillion if male and female entrepreneurs had equal access and funding from venture capitalists, nonprofit organizations, and corporations.

A consequence of limited funding is that women may need to invest more heavily in their businesses – and that can negatively affect their ability to save and invest for retirement.

Make plans for both the business and retirement

While creating a thriving business and contributing to the global economy is great, it’s not necessarily enough. Women also need to save and invest to provide themselves with secure financial futures. In fact, women often need to save more than men because, on average, they:

Live longer lives. Currently, the average life expectancy for a woman in the United States is nearly six years longer than a man. As a result, women may need to save and invest more today, so they have enough income to live comfortably throughout their retirement.

Earn less. PayScale reported that women in 2022 earned $0.82 cents for every dollar a man earned (based on median salaries). That gender pay gap often translates into a gender wealth gap that leaves women with less savings for retirement. For instance, according to a 2020 report from The Brookings Institution, women receive about 80% as much in Social Security benefits as men do.

Spend more time as caregivers. In its latest annual retirement survey (2022), Transamerica Institute found 38% of working women have or were providing unpaid care for relatives or friends (excluding parenting responsibilities). This often leads to a career adjustment and to women spending fewer years in the workforce to accumulate retirement savings.

Something else to consider is that while many women have a certain age in mind when it comes to when they want to retire, it may not be up to them. Consider this fact 47% of retirees retired earlier than planned. The primary reason for early retirement was a health issue or disability.

Workplace retirement solutions can help businesses thrive

In 2022, the Department of Labor reported that just 56% of employees at smaller businesses (100 or fewer workers) had access to workplace retirement savings plans.

Women business owners can improve their businesses’ ability to attract and keep talent, and strengthen personal retirement security, by offering an affordable retirement savings option. Setting up a workplace retirement solution can be straightforward, and some IRA-based retirement solutions require minimal administration.

Lower-cost workplace retirement solutions include:

Payroll deduction IRAs: Payroll Deducted IRAs are a great way for employees to save for their retirement, with minimal cost to the employer. Payroll Deducted IRAs are the least complex choice available, and often have the lowest administrative fees.

Savings Incentive Match Plan for Employees (SIMPLE) IRAs: SIMPLE IRAs are available to employers with 100 or fewer employees. While a 401(k) plan may also be a possibility for these employers, SIMPLE IRAs may be preferable due to their lower administration costs.

Simplified Employee Pension (SEP) IRAs: This is an option for business owners who want to save more than they could in a standard IRA, since they can contribute up to 25% of their total income to a SEP IRA, and there is no ongoing plan level cost to using a SEP IRA.

The Millennium Trust Retirement Savings Selector Tool for Small Businesses was built specifically to help business owners learn more about the types of solutions available and identify the option that best fits a company’s needs.

There is no denying that women business owners make a difference in the world and for those around them. They have every reason to do the same for themselves by strengthening their approach to saving and investing for retirement.

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Learn more about saving and investing in our Knowledge Center.

The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not offer or sell investments or provide investment, legal or tax advice.

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