Factor in saving and investing
Women save less than men — Unfortunately, because of historical work patterns and lower income levels, women are likely to enter retirement with fewer resources than men. Despite some progress in recent years, women still earn significantly less than men in almost every occupational classification. Full-time, working women earn 77 cents for every dollar a man earns, according to the latest Census Bureau statistics. However, there is encouraging news here. According to Ecommerce Journal, working women in their 20s have now closed the wage gap and are earning as much as men, and those who remain single earn more throughout their lives than men.
Women do need to have a realistic view of how their retirement savings opportunities can be impacted should they decide to work part-time or leave the workforce for any length of time to care for children or aging family members. First, women who continue to work part-time for an employer that offers a retirement plan are less likely to be vested if they are covered.
Second, of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45% participate in a retirement plan. And women's average defined contribution plan balances are only 60% of men's average balances. All these factors mean many women have not saved enough in their plan and need to consider stepping up their contributions whenever possible.
Women tend to be more conservative investors — Many women tend to gravitate toward conservative or “safer” investments, which is often a knee-jerk reaction to the investing process. If you haven’t done so already, learning more about the importance of long-term growth for your retirement portfolio, the relationship between risk and reward, the benefits of diversification and ongoing portfolio rebalancing, and the importance of tax-advantaged investing may be a great way to help ensure that your portfolio is balanced appropriately and is geared toward meeting your financial needs.
Be sure to track income sources — How much have you saved in your workplace savings plan? Are you aware of how and when to take Social Security? Do you understand survivor benefits should your spouse pass away? Are you entitled to a pension? Do you know if you are eligible for a portion of your husband’s pension or Social Security benefit if you are divorced or widowed? Being aware of all income that is due to you and how to distribute it in a tax-efficient manner is a key component of retirement success.
Consider a retirement income plan — Given women’s longer life spans, it’s important to think about putting your own retirement income plan into place so that you don’t outlive your retirement income sources. Perhaps you never married, or are divorced or widowed. You need to know exactly how much income you can count on each month and where the sources will come from. Be sure to discuss your plan with your investment professional.
Take action:
- Consider maximizing your retirement savings through automatic investing in your workplace savings plan. In addition, consider making catch-up contributions after age 50.
- Confirm that your investment mix is aligned with your short- and long-term financial goals.
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