HOW MUCH DO WOMEN NEED TO RETIRE COMFORTABLY, PLUS STRATEGIES TO GET HERE
March is Women’s History Month.
While we certainly celebrate how far we’ve come, this month also deserves some collective self-reflection, notably in improving our financial health and safety nets and retiring comfortably without undue stress or worry.
Because while we account for more than half (50.7%) of the college-educated labor force in the United States, it’s still a longer, more challenging road for us to get to retirement.
Women in Hawaii, for example, face the biggest retirement savings gap. They need to work just over 11 years longer and saving $422,897 more than men. It is, in fact, the biggest disparity for any U.S. state.
Closer to home, women in Mississippi and South Carolina need to work nearly 10 years longer than men to retire comfortably.
Women, generally, face more retirement-planning challenges according to a recent NetCredit study.
Women earn an average of 82% of what men earn, according to a 2022 Pew Research Center analysis.
Whether assumed or explicitly stated within families, we are still more likely to be the designated caretakers to take time away to raise children or care for aging parents.
Overall, we live longer than men. In 2022, U.S. life expectancy at birth showed men had an average life expectancy of 74.8 years, while women, on average, live to 80.2 years. Living longer means we are likely to see higher health care costs and the need for some kind of assisted living support or nursing home care.
We know the hurdles, but what are the solutions?
OUR TOP 4 STRATEGIES TO HELP WOMEN RETIRE COMFORTABLY
START SAVING RIGHT AWAY.
It’s never too early, by the way. Those early working years of your 20s and early 30s are prime opportunities to save. With that said, I get it. Making enough money to pay for the bills, the rent and student loans, and for the necessities, like groceries (eggs!) and health care, can feel impossible. Saving for retirement? That need seems a million years away.
But if you start saving early for retirement—and stick with it—the payoff could be big. Barbara Ginty, a certified financial planner and host of the Future Rich Podcast, recently shared this example with Select, a CNBC money blog.
If you invest $2,000 a year (which is just $166 a month) from age 19 to 27, she says, and don’t save anything again after that, and assume your investments yield an average 10% rate of return over your lifetime, you’ll end up with $1 million by the time you’re 65.
Bonus: Money saved during this time or before taking time off to raise kids or care for family members, will amass compound interest. Compound interest is money’s best friend. It allows you to earn interest, i.e., more money, on the initial amount deposited plus on the interest that accumulates over time.
Tip: Aim to save about 15% of your annual salary. Put the money into a 401(k) and let the compound interest work its magic.
POSTPONE RETIREMENT AS LONG AS YOU CAN.
Even if you started saving early and have a nice little nest egg, consider delaying full-time retirement. Working even a few hours a week to cover regular expenses goes a long way. An attorney I know retired at 65. At 72, she still works 10 to 15 hours a week as a legal advisor for a local nonprofit.
Additionally, women, on average, live five years longer than men, which means retirement, and needed living expenses, could span a full 20 to 30 years. Working full or part time for as long as you can keeps money flowing in rather than always going out of your retirement accounts.
Plus, working keeps you active and on the go. You might even enjoy working a few hours every week to get out of the house and into the world, doing something you enjoy.
DELAY TAKING SOCIAL SECURITY
You’re eligible to receive 100% of your Social Security benefits once you reach 67, your full retirement age. However, by delaying benefits, you’ll receive up to an 8% benefit increase for each year you delay until age 70. This could result in up to a 24% higher monthly benefit.
Look at it this way: A 65-year-old woman in average health has a 50% chance to live to age 88. If she waits until age 70 to start collecting Social Security, and lives at least to her life expectancy, she will collect more than if she started at 67.
TAKE CARE OF YOU
Most of us at one time or another have assumed a caretaker role to others we love, whether for adult children, aging parents or an elderly friend. We were happy to do it (most days) and wouldn’t change our decision. But now, if you don't put retirement planning at the top of your to-do list, you risk short changing yourself later on.
Which is why I repeatedly advise clients to avoid prioritizing their children’s education over their retirement. Your children have options when it comes to financing college, including loans, grants and scholarships, and you can certainly contribute as you are able to those repayments.
But there’s no such thing as a retirement “scholarship.”
If you don’t have a retirement plan in place, you may end up relying on your children financially and emotionally, which could create irreparable resentment among those you love most.
As a woman in the male-dominated field of finance, I certainly understand the challenges women can face in being able to retire comfortably. We live it with you too. Together, we can make a plan and revise as needed so you are financially secure and able to confidently move on to whatever is next in life.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
