By Lyle Solomon
As per a BMO Real Financial Progress Index report, only 53% of women do not hesitate to plan for retirement. They confidently retire at the right time compared to 66% of men of the same age. In addition to that, 74% of women believe financial planning and retirement at the right time isn’t their cup of tea, compared to 58% of men. A study from the Employee Benefit Research Institute (EBRI) indicates – “unmarried women are less confident in their ability to retire securely than their married counterparts.”
While making a plan for retirement, women may face some financial issues. But to resolve these issues, they should maintain patience and follow certain effective strategies. Planning for a successful retirement is easy if they choose the right direction.
What type of retirement planning issues women often face?
These particular issues are common in retirement planning for women:
- Women bear higher healthcare costs
As per the Retiree Health Cost Index, women spend more on healthcare costs than men. A 65-year-old lady would pay about $155,000, whereas a man similar to that age would pay $134,000. Women live longer, so they also visit hospitals for regular checkups.
- Women work as the caregivers
Women normally work as caregivers for kids and elderly citizens in any household. As a normal course of work, they also need to take off days from work, take sick leaves, work on reduced work hours, or take vacations. Sometimes, women also need to leave their primary employment to do this caregiving job.
All of the above work adjustments have a significant effect on income. As per studies, caregiver women lost nearly $300,000 over their lifetime.
- Women receive less in Social Security
Women mostly work as caregivers, so they earn less than men. According to the record, women get $16,000 less yearly for the “motherhood wage gap. Apart from that, they also get 83.7% less wages than men. Due to this, women get lower social security benefits.
- Women are less prone to retirement planning
Women do not prepare themselves to sustain during their retirement. Due to lower lifetime income and reduced Social Security benefits, women can’t save more for retirement. They contribute, on average, 30% less compared to men.
Apart from that, women retire early due to several issues, such as poor health, caregiver work, or unemployment.
All of these issues can definitely impact retirement planning. But, there are some retirement planning tips for women that can make things easier.
Retirement planning tips for women
Here are several retirement saving and planning tips for women for a secure future
1. Set up a retirement budget
You must set up a budget for retirement. It will maintain a balance between retirement income and expenses. Your retirement plan must determine how to increase your own retirement savings. It should also manage unexpected expenses in the long run.
Consider the following factors while making a retirement budget:
- Review your income and expenses for a month
- Asses retirement income
- Calculate probable retirement savings
- Check out your long-term financial obligations
- Review household options in retirement
- Assess your overall current taxes
- Calculate how much you are getting as Social Security benefits
- Determine other costs necessary to secure retirement
- Choose your financial goals, such as setting up retirement accounts, asset allocation, etc.
You should get retirement advice from an expert financial advisor. Find out a certified financial planner and discuss your issue.
2. Focus on saving and investing
Women need to save and invest as much as possible for a better retirement life. Women tend to keep their investments intact, which is good for retirement planning. Using the benefit of compound interest, a woman can grow her nest egg easily.
There are a few effective ways to do that:
- Save 10% to 15% of the monthly income towards retirement savings.
- Set up retirement saving plans as per your age. Save three times your salary by 40, eight times your salary by 60, and 10 times your salary by 67.
- Take advantage of the employer-offered match and contribute to your workplace retirement plan.
- Choose catch-up contributions to IRAs and other plans at the workplace.
- You must contribute to tax-advantaged accounts such as a Roth IRA, IRA, SEP or SIMPLE IRA.
- Invest in a Health Savings Account (HSA). This tax-advantaged account provides money for current out-of-pocket health expenses. Still, it can also be applied toward services not covered by Medicare, insurance premiums, and long-term care expenses in retirement.
3. Get as much as possible from Social Security
Women should register for a “my Social Security” account and track their own income, retirement benefits, disability benefits, and survivor benefits.
Married women can get delayed-retirement credits and increase their Social Security income. If they do not claim till the age of 65, they can increase it by 8% annually till age 70. Divorced women, married for at least 10 years, can get Social Security benefits on their ex-spouse’s record. But they must be 62 and unmarried to get that benefit. This is particularly important in cases involving child custody where financial stability can be a concern.
Widowed women can get widow’s benefits when they are at least 60 or 50 when disabled. You may also select to get the survivor benefit if you are 62 or older.
4. Explore income streams
Retirement demolishes your financial security. So, you must explore an income stream as a part of your retirement savings plan. Without a stable income, you can’t save money, sustain your daily life, and may finish up all your retirement savings soon.
You may consider the following sources:
- Personal savings
- Distributions from IRAs and workplace plans
- Pension distributions
- Payouts from annuities
- Inheritances
- Social Security
Calculate how much you may earn from the above sources. If the amount isn’t enough, look for a side hustle. A part-time job may give you decent earnings. You might again face a gender wage gap. Don’t worry; use your earnings to meet small expenses, such as groceries, transportation costs, small repair costs, or have dinner at a restaurant on weekends. You may also contribute the surplus money towards a new emergency fund or simply get out of debt.
5. Create an emergency fund again
Women with financial knowledge know how important emergency funds are. So, create an emergency reserve with enough money to meet unexpected retirement expenses. Financial professionals would suggest that women must save at least three to six months of living costs. Also, save the money in a savings account that offers you good interest.
6. Consult a financial professional
Women should discuss retirement planning with an expert financial advisor. A financial professional will offer expert advice on how to create a retirement plan. He/she also helps you secure your financial future. Different people have distinctive financial goals and needs. A certified financial professional is trained to deliver such needs. Apart from that, he/she also boosts your financial literacy.
Don’t consider a family member as a financial advisor. Don’t copy others’ retirement planning strategies. Your financial situation would be different from theirs, so have patience and do more research. Also, don’t leave your every financial decision to others. You should decide where to spend your money.
7. Find financial educational resources
Women can increase their financial literacy from the resources below:
- Financial education for adults and financial education for youths – by https://www.consumerfinance.gov/
- Money Smart program – by https://www.fdic.gov/
- Financial Literacy Resource Directory – https://www.occ.gov
- The Financial Literacy and Education Commission – MyMoney.gov
With many resources available to set women up for retirement, now is the time to start investing in the future. Although the gender disparities are all too real between men and women with regard to long-term wealth-building, there are ways to ensure financial stability for your future.
Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.
