Here's a scary truth: Women tend to retire with two-thirds less money than men, despite working the same number of years. Since women tend to live six- to eight years longer than men, protecting and growing their retirement nest eggs is crucial. It doesn't matter if you are married, partnered, or single; as a woman, you will have different needs in retirement, which should directly affect how you plan for retirement.
How does retirement planning differ for women?
Women face several unique, gender-specific challenges when creating their retirement plans. Women typically earn less than men and tend to live longer, which means that their retirement savings need to last longer. While women are more likely to follow a budget, they're also more risk-averse when investing, creating less growth during the time they should be accumulating the most money.
Finally, women are also more likely than men to be caregivers for their aging family members and elderly parents than men, which often affects their career progression, salary gains, and retirement readiness.
What are steps women can take to plan for retirement throughout their careers?
While retirement planning is of the greatest importance for women, it doesn't have to be complicated or scary. Here are some tips to consider when planning for retirement:
- Use employer-provided retirement accounts as soon as possible (and know what to do if you don't have one). Many people make the mistake of waiting until mid-career to begin contributing to their retirement accounts. If you have access to a 401(k) or other employer-sponsored retirement savings plan, start contributing as soon as possible and max out your annual contributions. If you're one of the 55 million American workers without access to employer-sponsored retirement plans, open an IRA or a Roth IRA to grow your retirement savings on your own.
- Take an interest in investing, and be sure to diversify your portfolio. Women tend to make more conservative investments, which can ultimately lead to a smaller payoff than men. While you don't have to be bold with every investment you make, read as much as you can about investing and learn how diversification of assets can protect you while growing your nest egg. Also, think carefully about your propensity for risk and the time horizon you have. If you remember that you have 15 to 20 years left before beginning to tap your retirement savings, you may be willing to invest more in stocks.
- Prioritize your financial literacy. You don't have to solve math equations or understand the most complex jargon, but learning about smarter ways to save, spend, and invest your money will help you become more financially aware and literate. You should know the difference between managed mutual funds, index mutual funds, and exchange-traded funds. And, you should know how to set up a brokerage account and invest wisely. You can learn about saving for retirement using resources from the Social Security Administration or the Department of Labor, which has a guide that walks you through thinking about retirement. Find a mentor or adviser who can help you find the best investment plan as you grow older.