Everyone knows it’s important to save money for retirement. And if you’re a woman, then there are a different set of challenges that you may face. Studies have shown that women tend to live longer, take more time off from work to raise a family, and earn a lower salary than men, which means they have to save earlier and that much more for their retirement needs.
These are a few of the reasons why women need to plan for retirement differently than men. So what are some things that women need to consider when planning for retirement? While there are numerous strategies for women to plan their own retirement, here we list a few suggestions.
Start Saving ASAP
Living longer can be problematic if you outlive your retirement savings. And in today’s world, you can’t rely solely on Social Security benefits either. It’s important to make a financial plan early on in your career that includes regular contributions to a retirement account to gain compound interest.
Financial experts recommend that women should save at least 20% of their income and put it towards their retirement. If the 20% goal isn’t achievable for you yet, then consider tracking your spending with an Excel spreadsheet or online budgeting tools like Mint or Level Money.
You can estimate what your costs will be during retirement and determine which costs you can eliminate today in order to put that towards your savings for the future. Canceling that magazine subscription or brown-bagging your lunches to work instead of eating take-out will save you more than you think in the long run.
Put Your Retirement Savings First
Women tend to save money for their family’s needs before their own. According to a Country Insurance & Financial Services survey, 49% of mothers made their children’s college savings a top priority when compared with 39% of fathers who chose saving for retirement first. Experts agree that women should save money for their retirement first before saving any extra money for college tuition, family vacations, sports, hobbies, etc.
Participate in Your Employer’s Retirement Plans
Working women should take advantage of their employer’s tax-deferred retirement plans like a 401k, 403b, or 457. Contributing to these accounts is one of the best ways to invest and save for retirement. Some companies may offer an employee match program, which is basically free money that should never be turned down.
If you switch jobs, never cash out of your company plan. Instead, roll your old plan into your own IRA or Roth IRA account to keep accumulating savings. And if you’re a stay-at-home mom you can also have a spousal IRA, which your partner can contribute to, up to $5,000.
Diversify & Invest
Building your nest egg is crucial, but once you have a good amount, what do you do with it? Spreading your money across different accounts is key when it comes to long-term wealth and financial security. Women should have multiple accounts like a checking account for daily expenses and bills, a savings account for fast cash emergencies, a 401k account for retirement, and a diversified mix of mutual funds and long-term stock investments.
Taking a specific percentage of your money and investing in stocks and bonds like low-cost index mutual funds, bonds, or cash value life insurance will help your finances grow to replenish your short-term money over a period of time. If you don’t know how much to invest in stocks, a simple formula to remember is this: 100 – your age = amount invested. So if you’re 30 years old then subtract that from 100 and that gives you 70, which is the percentage you should invest in stocks.
Social Security Benefits
It’s important to check on the benefits you can expect to receive from Social Security by looking over your annual statement to see how much you’ve paid into it. You can see your estimated benefits based on your earnings or 50% of your spouse’s benefits, which you are entitled to even if you’ve never worked. It’s also crucial to check your benefits and report any inconsistencies to the Social Security Administration. And if you’re a widow, you are entitled to collect your spouse’s Social Security benefits beginning at the age of 60, or 50 if you’re disabled.