3 Strategies for Women to Save More for Retirement
Saving for retirement is a difficult task for anyone; however, women often face their own set of special challenges. Women’s careers are often interrupted to care for children or elderly parents, so they may spend less time in the workforce and ultimately earn less money than men in the same age group. As a result, their retirement plan, Social Security and pension benefits are often lower. Women generally earn less money but typically live longer than men, meaning they will likely need to stretch their retirement savings and benefits over many years.
With these lifestyle challenges in mind, Fred Dawson, a financial consultant with Bassett, Dawson & Foy, Inc., has provided three strategies to help women save more for retirement.
1. Begin saving now—you have many options
Start with a realistic assessment of how much you will need to save. If that figure is substantial, don’t be discouraged—the most important thing is to begin saving now. Although it’s never too late to save for retirement, the earlier you start, the more time your investments have the potential to grow. Here are a few suggestions:
- If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), join it as soon as possible and contribute as much as you can. It’s easy to save because your contributions are deducted directly from your pay. Some employers will even match a portion of what you contribute.
- If your employer offers a pension plan, find out how many years you’ll need to work for the company before you’re vested in or own your pension benefits. Women balancing work and family sometimes shortchange their retirement savings by leaving their jobs before they become vested in their pension benefits. Keep in mind, too, that because your pension benefits will be based on your earnings and on your years of service, the longer you stay with one employer, the higher your pension is likely to be. Most employer-sponsored plans allow you to choose from several investment options (typically mutual funds).
- If you have many years to invest or you’re trying to make up for lost time, give special consideration to growth-oriented investments such as stocks and stock funds. However, along with potentially higher returns, stocks carry more risk than less volatile investments. A good way to get detailed information about a mutual fund you’re considering is to read the fund’s prospectus, which can be obtained from the fund company. It includes information about the fund’s objectives, expenses, risks and past returns. A financial professional can also help you evaluate your retirement plan options.
2. Save for retirement even if you aren't working
Even if you’re not working, or are staying at home to raise a family, you can—and should—continue to save for retirement. If you’re married and you and your spouse file your income taxes jointly, you may open and contribute to a traditional or Roth IRA, as long as your spouse has enough earned income to cover the contributions. Both types of IRAs allow you to make contributions of up to $5,500 or, if less, 100 percent of taxable compensation. If you’re 50 or older, you’re allowed to contribute even more—up to $6,500.
3. Plan for income in retirement
Do you worry about outliving your retirement income? At age 65, women can expect to live, on average, for an additional 20.3 years. Women should also consider the possibility that they may spend some of those years alone. According to recent statistics, 37 percent of older women are widowed, 14 percent are divorced and almost half of all women age 75 and older live alone.* For married women, the loss of a spouse can mean a significant decrease in retirement income from Social Security or pensions. So, what can you do to ensure you’ll have enough income to last throughout retirement? Here are some tips:
- Get a part-time job. Picking up a part-time gig after you walk away from 9-to-5 work will ease the pressure on your finances.
- Consider purchasing long-term care insurance. Long-term care insurance will help protect your retirement savings and income from the high cost of nursing home care or assisted living.
- Create a housing plan. Downsize to a smaller, less expensive home in an area where the general cost of living is lower. Or consider moving to a state that has a more advantageous income tax regime for retirees.
- Learn the basics of investing. A financial professional can help you set attainable financial goals and provide strategy options to plan for retirement.
*Source: The National Vital Statistics Report, Volume 61, Number 4, May, 2013
Fred Dawson, ChFC (Chartered Financial Consultant) and CLU (Chartered Life Underwriter) has over 30 years of comprehensive wealth management experience. He is executive vice president of Bassett, Dawson & Foy, Inc. and a founding principal partner. Successful women are prominent among his diverse domestic and international client base of professionals, retirees, professional musicians and business owners.
For more information or to schedule a complimentary, no-obligation initial consultation, call (302) 999-9330 or email firstname.lastname@example.org.
Some content prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017.
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