Women save less for retirement than men do – – that is not a new fact or revelation. Women spend less of their adult years in the work force and on average women live years longer than men do. This news is nothing you cannot find in any article about women and retirement. The fact is women spend most of their adult life taking care of others (husband, children, parents, etc.) focusing less of their time and energy on planning for their retirement. On average, women choose saving for their children’s college education over contributing to a retirement account. Women are natural caregivers, often putting themselves last in priority. On average, women also earn less than men giving them less income to with witch to plan for retirement. However, the news is not completely bleak because women do have opportunities open to them to prepare for their retirement beyond the typical means of relying on social security and employer pension and retirement plans.
1. Retirement plans for self-employed women – Women who are self-employed do not have the advantage of an employer-provided retirement plan. However, they are not without options for planning for their retirement. Self-employed women can choose from a variety of retirement plans including Individual or Solo 401(k) plans, SEP IRA, Keogh and Simple IRAs. You should consult with your financial advisor to determine which plan is the best one for you.
2. Consider a spousal IRA – If your husband is working, he can contribute to a spousal IRA for you. It is not wise for women to rely solely on their husband’s retirement accounts. They should have their own retirement accounts and this is an excellent way to begin saving for retirement even if you are a stay-at-home mom.
3. Stock Accounts and Mutual Funds – Begin an investment account and contribute to it on a regular basis. If your employer offers direct deposit, have a set amount deposited to your account each pay period. This type of investing is referred to as dollar-cost averaging which yields the best results in the long term.
4. Increase contributions to employer-provided retirement plans – If you are working and already contributing to your 401(k), congratulations! However, this may not be enough to see you through retirement. Use a retirement planning worksheet such as the Ballpark E$timate to project the amount of money you will need to live comfortably during retirement. If you are not contributing enough to your 401(k) to generate this amount, increase your contributions immediately.
5. Work longer – If you are already nearing retirement age but do not have sufficient funds for retirement, consider working longer. This may not be a pleasant thought for more mature women; however, each year you work increases the amount you contribute to your retirement plans. Furthermore, working longer will increase the amount of Social Security you receive each month.
6. Reconsider expensive purchases as retirement nears – Having a vacation home, brand new vehicle or remodeling your entire home may be very tempting; however, if you are doing this in the few years before retirement consider how this will affect your retirement accounts. Furthermore, if the price will be financed over a period of time how will this affect your budget when you retire – – will you still be paying for this long after you retire. Before you justify that expensive purchase by arguing you have worked hard all your life, take the time to question if it is the best decision for your retirement plans.
The best advice for women planning for retirement is to start now without further delay. Even if you have not taken any steps to plan for your retirement, it is never too late to begin. The United States Department of Labor has publications specifically designed for women to help them determine their retirement needs and plan for their retirement.
Huddleston, Cameron. “Do-It-Yourself Retirement Plans” (Kiplinger.com)
The United States Department of Labor