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

How Women Business Owners Can Strengthen Their Business and Their Retirement

March 22, 2021
By Millennium Trust
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Women entrepreneurs are a driving force in the economy. They have been resilient throughout the pandemic, where they have been disproportionately affected in terms of job loss or having to leave their job, opening new businesses and reconfiguring existing businesses to balance the changing demands of home and work. Women’s success is essential because, as we emerge from the current COVID-19 pandemic, the ingenuity and business savvy of women will continue to help power the global economy.

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 as compared businesses founded by men.

Shalini Unnikrishnan and Cherie Blair of BCG reported,

“…there is a sure-fire way to add $5 trillion to the global economy…if women and men participated equally as entrepreneurs, global GDP could rise by approximately 3% to 6%, boosting the global economy by $2.5 trillion to $5 trillion…However, unleashing the power of women entrepreneurs will require action from a range of groups, including venture capitalists, nonprofit organizations, and corporations. These efforts must address a critical and at times overlooked issue: the lack of networks that effectively support and mentor women entrepreneurs.”

One 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.

A Plan for Your Business and a Plan for Your Retirement

While establishing a thriving business and contributing to the global economy is great, it’s not necessarily enough. Women should also save and invest to provide themselves with secure financial futures. In fact, women may 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 three to five 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 in retirement.

Earn less. PayScale reported that women in 2020 earned $0.81 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.

“In 2016, women age 65 and older had a median household retirement income of $47,244, which is 83 percent of median household income for men ($57,144),” reported the National Institute on Retirement Security.

Spend more time as caregivers. Almost four-in-10 women1 spend part of their working years providing unpaid care for children or loved ones. Often, this necessitates a career adjustment. One consequence is that women may have fewer years in the workforce to accumulate retirement savings.

If you have a certain age in mind for when you want to retire, consider this fact: 48% of retirees retired earlier than planned. The primary reason for early retirement was a health issue.

Retirement plans can help businesses thrive and help employees build financial security.

In 2020, the Department of Labor reported that just 55% of employees at smaller businesses (100 or fewer workers) had access to workplace retirement plans.

Women business owners can improve their businesses’ ability to attract and retain talent, and strengthen personal retirement security, by offering an affordable retirement savings option. Setting up a workplace retirement plan can be straightforward, and many types of IRA-based retirement plans require minimal administration.

Low cost workplace retirement solutions include:

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

Simplified Employee Pension (SEP) plans: This is a great option for employers that want to save more than you could in a standard IRA, since you can contribute up to 25% of your total income to a SEP IRA, and there is no ongoing plan level cost to using a SEP plan.

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

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

Women business owners are making a difference in the world. They shouldn’t forget to look out for themselves by saving and investing for retirement.

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Learn more about saving and investing in our Knowledge Center.

1 “Retirement Security: A Compendium of Findings About U.S. Workers 20th Annual Transamerica Retirement Survey of Workers.” Transamerica Center for Retirement Studies. December 2020.

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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