Women may need financial catch-up
By Brian M. Conrad l CFP, Financial Advisor
It’s unfortunate but true: if you’re a woman, you face more obstacles to achieving financial security than men. And that means you might have to put in some extra effort.
How serious is your challenge? For one thing, women still face a gender pay gap — based on median earnings, women earn about 82 cents for every dollar a man earns, according to the US Census Bureau. That pay gap equates to a nearly $470,000 difference in lifetime earnings, according to an Edward Jones/Age Wave study. Moreover, when taking into account the career interruptions women face due to childcare and aging parents, that $470,000 represents a lifetime earnings gap of $1.1 million, according to the study. Finally, women tend to live longer than men, which means their earnings must last longer.
Everyone’s situation is different, but these numbers at least indicate the challenges that many women face. To help you, consider these moves:
- Pay yourself first. You still have to pay your bills – but, at the same time, pay yourself by automatically transferring money from your checking account each month to a low-risk liquid vehicle, such as a money market account or some type of management account of cash connected with your investment portfolio. This move can help give you a “bucket” of cash to use for whatever reason, such as the need to take time away from your job to care for children or aging parents.
- Increase your 401(k) contributions each year. If you have a 401(k) or similar employer-sponsored retirement plan, take full advantage of it. At a minimum, contribute enough to earn your employer’s match, if any, and increase your contributions each year or whenever your salary increases.
- Fully fund your IRA. Even if you contribute to a 401(k), you may still be eligible to invest in an IRA — and you should. You can contribute up to $6,000 per year into a traditional or Roth IRA, or $7,000 if you’re 50 or older (however, a Roth IRA has income limits that may prevent you from contributing the full amount) .
- Learn more about social security options. Because Social Security provides a lifelong stream of income that includes increases in the cost of living, it can help mitigate two key risks you face in retirement: increased life expectancy and ‘inflation. You can start taking Social Security benefits as early as age 62, but your monthly checks will be considerably larger if you wait until your “full” retirement age, which will likely be between 66 and 67. . If you delay benefit payments beyond your full retirement age, your payments will increase by 8% per year, until age 70, when your benefits reach their maximum. You’ll also want to find out about spousal and survivor benefits, which can affect how much you’ll receive.
- Acquire help. You may be able to benefit from working with a financial professional, who can assess your situation, make investment recommendations and help you answer questions you may have, such as: elderly parent? »
Hopefully there will be a day when women don’t have to catch up financially. For now, however, use all the means at your disposal to help you.
Brian Conrad is a Certified Financial Planner and Financial Advisor at Edward Jones. His office is located at 479 Jumpers Hole Road, Suite 202, Severna Park. For more information, call 410-544-8970, email [email protected] or visit www.edwardjones.com/brian-conrad.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones, SIPC Member