Why Women Should Plan Their Retirement Differently Than Men
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The burden of retirement savings in the United States is heavy for most people, but it is generally heavier for women who, due to a number of factors, have a greater likelihood of running out of money in their golden age. For starters, women on average live longer than men. It’s certainly not a guarantee, but women should be prepared to see at least their early 80s, while the death rate for men hovers around 76.
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The need to prepare for a longer life expectancy than men is just one of the many ways women need to plan for their retirement differently than men. Women must also consider the seemingly endless problem of the gender pay gap.
The gender pay gap adds up
The income and pay gap adds to the retirement challenge for women, said Sandy Higgins, senior wealth adviser at Capstone Financial Advisors.
“The reasons for this discrepancy are varied, but what is true are the statistics and the cumulative impact of this on retirement savings,” she said. “According to the US Census Bureau, women in the United States earn about 30% less than men in the 35-44 age bracket. These may be the highest earning years in an individual’s career. According to the Bureau of Labor, in total, women earn only 82 cents for every dollar paid to a man. While this difference may seem small to many, over time the results can be substantial.
2 out of 3 caregivers are women
As the pandemic has starkly revealed, women are always much more likely than men to be the caregivers of their families, whether raising children or caring for an aging parent. According to the CDC, two out of three caregivers in the United States are women.
“While that’s not always true, statistics show that women are more likely to leave the workforce to raise families or care for older family members,” Higgins said. “This can impact not only overall savings, with the loss of salary and employer-sponsored retirement plans, but also future earnings growth through advancements and promotions.”
Related: 8 Steps Women Need to Take to Close the Pension Gap
How Women Should Plan for Retirement
Considering the factors above, it’s clear how important it is for women to develop a retirement plan that sees them through their golden years, despite these drawbacks.
Have confidence in yourself and educate yourself
It was not until the 1960s that women were allowed to open a bank account in their name. And still to this day, men are more commonly identified as the breadwinners of their families. Also, men tend to be more financially savvy, partly because society allows and encourages it. Women need to be extremely involved in their own financial lives, which means deepening their personal finance education and gaining confidence. They have every reason to be motivated as they tend to be more responsible with money.
“Women are simply more financially savvy than they think they are, but lack of confidence affects their ability to retire when and how they want,” said Nicole Keirnes Scanlon, managing director family wealth at Olson Wealth Group. “With less confidence, they are less likely to participate in retirement savings and market opportunities. They are also less likely to create a plan due to their fear of not speaking intelligently about finances or being misunderstood. These missed opportunities can cost thousands of dollars in the future. While it’s important to look for ways to educate yourself, your ability to recognize the intelligence that already exists and feel confident talking to that intelligence is equally important.
Create an emergency fund so you don’t dip into your 401(K) too soon
“Not only will dipping into your 401(k) reduce your current retirement account balance, but it can also cause you to lose significant compound interest over the years,” said Kristen Carlisle, chief executive of Betterment at Work. “I recommend setting up an emergency fund that could cover at least three to six months of living expenses to reduce your financial anxiety in the face of unexpected life events such as unemployment, serious illness, or unexpected medical needs. care – all circumstances that often affect women.
Have accounts listed in your own name
“Maintaining a bank and/or investment account, as well as a credit card in your name, allows you easy access to funds in the event of events such as divorce, death, or death. incapacity of a spouse,” said Leslie Thompson, CPA, CFA and Chief Investment Officer. agent at Spectrum Wealth Management. “In the event of a divorce, access to your own funds will enable you to hire a lawyer and other advisers, as well as fund necessary expenses without delay or judgment. In the event of the death or incapacity of a spouse , the lack of title or authority to transact through a Power of Attorney will likely prevent you from accessing funds when needed.Holding accounts in your name can help you through these transition times difficult.”
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Invest more and invest now
“Studies show that women tend to be better investors than men,” said Sandy Yong, aka The Money Master. “As such, they should take the initiative to learn how to invest their money in the stock market and not leave it in cash or a savings account. Women are more balanced and can stick to a plan long-term instead of chasing after hot stocks. This means they can outperform their male counterparts and have the potential to grow their wealth over time. The sooner women start investing their money, the more they have time to take advantage of compound interest and grow their money.”
Be comfortable with risk
Not surprisingly given how we’ve been programmed by society, women tend to be more risk averse than men. This can be a huge setback when it comes to one’s financial portfolio.
“Don’t be too conservative with your investment; if you invest too conservatively, you won’t be able to keep up with inflation,” said Catherine Azeles, CFP, investment consultant at Conrad Siegel. “As we all know, commodity prices are rising and we need to make sure our investment dollars follow suit.”
Make yourself number 1
Women need to find a balance between the amount they save for themselves and the amount they save/spend on their children.
“It’s no secret that women often put the well-being of their children before themselves,” said Amy Ouellette, senior vice president of retirement services at Vestwell. “What does that look like in terms of savings? Women might choose to set aside money for their children’s education before putting money into their retirement accounts. It is my personal belief that if you want to do good with your children, take care of yourself first. When considering where to allocate funds, remember that there are ways to borrow for education if needed, but the same cannot be done for retirement.
This same principle also applies to caring for aging parents.
“As difficult as it may seem, it’s important for parents to live off their own retirement savings and, if necessary, explore publicly funded support systems such as Medicare,” Ouellette said. “In doing so, it helps break the cycle of financial pressure on the next generation.”
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