Despite progress toward financial planning and saving, women often face challenges regarding their financial security. These challenges can include more time away from the workforce (often caring for children or for parents), the gender pay gap, and other factors that impact their investing and saving for retirement. Women need to recognize these barriers to saving and investing and prepare by making informed decisions for themselves.
Here are a few of the unique challenges women face when saving for retirement:
Women live longer: The average life expectancy for women is age 86, and she'll spend, on average, 21 years in retirement.
Women are more likely to live in poverty: Women age 65 or older are 43% more likely than men to live on an income below the poverty level, and 65% of the elderly poor are women.
Women are more likely to work part-time: 30% of female workers are part-time workers with no retirement savings benefits.
Women earn less than men: In 2020, women earned 84% of what men earned of both full- and part-time workers.
Women care for others: 35% of caregivers are women, and mothers are more likely to reduce their work hours or step away from employment to care for their children. Often, they provide care to other adult family members.
Even though women face more significant risks and challenges in saving for retirement, there are essential components to retirement readiness that can help you put a more solid foundation in place as you prepare for retirement:
Participate in your employer's retirement savings plan: If you work for an employer that offers a retirement savings plan, participate in it. Even if working part-time, you may be able to participate. Contribute at least enough to ensure you receive the employer’s matching contributions.
Set up and contribute to a self-directed retirement savings vehicles: The more you save at an earlier age into a Roth IRA or Traditional IRA, the better prepared you’ll be for retirement. While some rules apply based on your income and if your spouse contributes to a retirement savings plan, a financial professional can help determine which is appropriate for your situation.
Prepare for emergencies and have a backup plan: Circumstances like divorce, death, or injury can prevent retiring as planned. Setting up an emergency savings account with three to six months of expenses, life insurance, disability insurance, a budget, and a plan to reduce your debt can help ensure you have enough left to fund your retirement savings in an emergency.
Create a 'single-view' financial plan: Women should work with a financial professional to create a single-view financial plan that reflects only their retirement savings contributions, and only their source of income. While you may have a secure relationship, having a single view plan will help prepare you for the future, regardless of what happens.
Consider the possibility of delaying your retirement: A 2021 report indicates that eight in ten women are taking steps to ensure continued work:
- 61% are staying healthy so they can work longer
- 48% are keeping their job skills up to date
- 25% are networking and meeting new people
- 22% are taking classes to learn new skills
- 17% are scoping out the employment market and opportunities available
- 16% are obtaining a new degree, certification, or professional designation
- 12% are attending virtual conferences
A financial professional can help: If you're a woman concerned about saving for retirement or have questions about your unique situation, give us a call. Our team understands the unique challenges women face, and we’re passionate about helping women just like you plan for a comfortable retirement. Contact us and let’s get started.
Courtesy of Fresh Finance.
Financial Vision Advisory Services, LLC
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