Saving for retirement remains one of the most important financial goals for both men and women. While saving for retirement is a huge endeavor for everyone, women face a variety of unique challenges and obstacles that should be taken into account in their long-term planning.
First of all, and perhaps most importantly, women, on average, live longer than men. Therefore, they will simply need more money during retirement than men. According to a 2013 National Geographic resource, women at age 65 are expected to live another 16 years, while men are expected to live 11 years after age 65. This means many women will need to be prepared financially and emotionally for a longer time frame than their male counterparts.
Another challenge women face is that they typically have fewer years in the workforce. This is because women are more likely than men to take time off from work to have and raise children, and sometimes interrupt their careers to care for aging parents.
Work interruptions have significant financial consequences. For instance, women's contributions to Social Security cease when they become unemployed, ultimately reducing the Social Security benefit when they retire. Social Security Administration resources from 2013 show average annual payments in 2011 of $12,188 to women versus $15,795 to men.
Work interruptions can also make it more difficult for women to compete for promotions and salary increases. For that reason, among others, women's annual salaries are on average approximately 77 percent of men's, according to a 2013 Forbes Magazine report. Although the wage gap has been decreasing over the last few years, U.S. Census figures show the median income for women who work full-time was $35,549 per year in 2009, compared to $45,485 for men.
Due to lower earnings and fewer years working, women are less likely to be saving toward their retirement than men. They also save less when they do contribute, according to a 2013 report from Aon Hewitt that found relative averages of 6.9% for women and 7.5% for men in terms of the percentage of annual earnings that goes into a savings plan. This study also found that 31% of women contribute below the suggested threshold from their employers; for men, that figure is 25%.
Yet another challenge is that women tend to be more conservative investors than men. A 2013 article from Investopedia goes over some of the reasons why women tend to have a lower risk tolerance, and therefore tend to be more conservative with their investments. Although there is a place for conservative investments in most portfolios, investing too conservatively across the board can lead to decreased savings and diminished retirement investments.
Here are some financial tips specifically geared towards women to help them better prepare for their retirement:
Make saving a priority
Some women get sidetracked when balancing many financial obligations. They should remember to focus on taking care of their future and not let saving for their own retirement slide.
Invest more
Women should actually consider investing more than their male counterparts to account for their longer lifespan and smaller earnings. Women must take into consideration both their risk tolerance and time horizon so they can invest appropriately toward their goals.
Contribute to retirement plans
If youre eligible and your employer provides a retirement savings plan such as a 401(k), do not delay signing up. Start saving as soon as you are eligible and contribute as much as you can, especially if your company has a matching program. You may want to augment your 401(k) savings by contributing to an Individual Retirement Account (IRA). An IRA is also a good option if your company does not offer any retirement savings accounts.
Save, even if you are not working
If you have taken or are planning to take time off from work to raise kids or care for aging or ill family members, try to continue to save money in your IRA accounts. Married people filing jointly are able to make a deductible IRA contribution based on their earnings.
Delay your retirement
If you are nearing retirement and feel that you are not financially prepared, you may want to consider delaying your retirement. By delaying your retirement, you continue to earn income and postpone taking withdrawals from your retirement savings, which allows your assets to continue to compound and grow. Delaying will give you more time to save and contribute to your Social Security benefit.
Seek help
Meet with a qualified financial advisor who can help you create a personalized financial plan which includes retirement savings and options designed specifically for your unique needs and challenges.
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