How women can close the retirement savings gap
Many聽Americans don鈥檛 save enough for retirement, but women face particular challenges. There are often聽聽on their retirement incomes, including longer life expectancies, greater health-care costs, and a greater likelihood that they鈥檒l provide care for their children or parents. At the same time, their ability to save is often reduced due to wage inequality and careers interrupted to raise children.
This means women have to be especially diligent about retirement planning. Here are a few ways you can make sure you鈥檙e on the right path:
Save what you can now
The best way to have enough money in retirement is to plan ahead 鈥� way ahead. Start saving as soon as possible, even if you haven鈥檛 sketched out a plan yet. Saving early is even more important for women because childbirth and child-rearing might interrupt working years and limit lifetime income.
Starting earlier will give you聽more flexibility, should聽you want to work less聽or add another person to the mix. It also means you鈥檒l need to save less each month. For example, if you start saving $200 per paycheck at age 20, and have an investment return of 4.5% per year, you鈥檒l have $77,568 saved at age 33. But if you wait to start saving until you鈥檙e 26, you鈥檒l need to save $330 a month to have the same amount聽in your account at age 33.
Estimate your retirement income needs
People are typically told聽that in retirement they should plan to spend聽70鈥�85% of what they currently do. In my experience, though, people often spend just as much or more in retirement as they did while they were working. And because women tend to live longer than men do, they often need to save even more.
You鈥檒l also have more free time for activities and聽vacations during retirement, or you may need to personally cover expenses that your employer once paid, such as your phone bill or some meals. Conversely, child- or mortgage-related expenses may drop off around the time you retire.
To聽estimate your retirement-income needs, create a spreadsheet with one column listing all of your current expenses, and another聽column listing your projected expenses in retirement. A chart like this should help you envision how your expenses will change over time, either as a change in dollar amounts or as a percentage change.
Unexpected situations can arise, of course, but it鈥檚 still important to guess how much you鈥檒l need聽to support your lifestyle once you stop working.
Calculate how much you should be saving
Once you have an idea of how much you will want to spend annually, you can figure out how much you need to save to achieve that number, starting now. This step alone would put you ahead of most Americans. In a聽, only 23% of respondents had even tried to calculate how much they would need to save for retirement.
Online calculators can help you聽double-check your estimates and start making a strategy. Most online retirement calculators will consider factors such as聽inflation and investment rates of return. Try the calculators at聽,听听辞谤听聽to get started.
Maintain聽your skills and contacts
If you need to leave the workforce, whether it鈥檚 to raise children or care for aging parents, help ensure that you can return to it successfully by keeping your skills and professional networks fresh.
Consider taking professional-development courses, and attend mixers and stay in touch with colleagues to keep your network active. Making time for these steps can be a challenge, but even a relatively minimal time investment can pay dividends when you鈥檙e ready to re-enter the workforce.
Consider long-term care insurance
Women鈥檚 retirement needs projections should cover long-term care 鈥� such as nursing homes, assisted living, or in-home care services 鈥� in case they become incapacitated later in life. The average 65-year-old has a 70% chance of needing long-term care at some point in his or her life,听.聽Women need professional care more often than men do聽because of their higher incidence of chronic illness and longer life spans 鈥� which means they鈥檙e more likely to聽be living alone by the time they need help.
Because long-term care聽can be expensive, you might want to buy some coverage through a聽. Premiums are cheaper the younger you are when you buy the policy. A good time to start thinking about this is in your mid-50s.
Ensuring that you have a reasonable income during retirement is your responsibility. Be proactive, and聽don鈥檛 expect someone else 鈥� like your husband 鈥� to work it out for you. The sooner you get started, the better you can plan for the future and make any changes necessary before you retire.
聽is a financial advisor and COO with聽. Take Mosaic鈥檚聽聽to make sure you鈥檙e on the right track with your money.
Learn more about Sabrina on NerdWallet鈥檚聽.
