Despite progress toward financial planning and saving, women often face challenges regarding their financial security. Among these challenges is more time away from the workforce, the gender pay gap, and other factors that impact their investing and saving for retirement.
Women need to recognize the 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 where 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.
While women face more significant risks and challenges in saving for retirement, there are essential components to retirement readiness that can help women prepare a solid foundation for their secure retirement:
Participate in Your Employer’s Retirement Savings Plan
If you work for an employer that offers a retirement savings plan, participate in it. Contribute enough to ensure you receive the employer’s matching contributions. Even if working part-time, you may be able to participate.
Save Into 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, your 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 their financial professionals to create a single-view financial plan that reflects time off from work, only their retirement savings contributions, and only their source of income. While many women have a secure relationship, having a single view will help prepare them for the future, regardless of what happens.
Women must continue to work to invest and save for their future. A 2021 report indicates that eight in ten women are taking steps to ensure continued work:
- 61% are staying healthy so they can work
- 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
Source- Transamerica Center for Retirement Studies
A Financial Professional Can Help
If you’re a woman concerned about saving for retirement or have questions about your unique situation, we are here to help you plan for your future. Contact us to get started.
