Over the past decades, women’s roles in both the workplace and at home have evolved. Today, women are employed in what were at one time considered primarily male professions, are in more leadership roles and often acting as CEO of the family finances.
But when it comes to saving for retirement, women face unique challenges. According to the Insured Retirement Institute (IRI), women have longer life expectancies (and can expect to have longer retirements), yet have lower amounts saved for retirement.1
Here are just three factors that contribute to this deficiency:
Time off for caregiving.
When women have multiple roles, including primary caregiver of children, aging parents or family members with special needs, they may leave the work force altogether or seek part-time employment. This may translate into lower pay during these years, and more limited access to company-sponsored retirement plans. According to a LIMRA/LOMA Secure Retirement Institute study on women and retirement, about one in five working women (22 percent) has or expects to take time out of the workforce to act as a caregiver for a child or aging parent; and 67 percent believe that it will negatively impact their ability to save for retirement, and ultimately, the size of their retirement nest egg.2
More likely to work part time.
In the same study, it’s noted that 28 percent of women work part-time compared to only 14 percent of men.2 Working part-time translates to reduced earnings for women. It also means less access to employer benefits, increasing what they pay for these same services, and they may not qualify for the company-sponsored 401(k) plan and employer match.
Lower employer sponsored retirement plan contributions.
Another important finding is that, among current employer retirement plan participants, women contribute less than men. The median contribution for women is 7 percent and for men it is 10 percent. (The average for women is 10.8 percent compared to 11.4 percent for men).2 Lower deferral rates will likely result in lower retirement plan account balances.
So what can women do to overcome these challenges?
The first and most productive step is the same for both men and women:
Start actively thinking about – and planning for – your retirement. (The good news is that, in the few minutes you’ve spent reading these challenges, you’ve engaged in advancing your retirement planning efforts.)
Calculate how much you’ll need to save and your future income sources. Fortunately, there are many websites and financial tools that help simplify retirement planning concepts and calculations.
Once you have a better picture of what it will take to retire, you can evaluate your situation and the impact it will have on your ability to save:
If you have access to an employer retirement plan, take advantage of it. Enroll when you are first eligible and contribute as much as you can.
Understand how increasing your contribution just 1 percent can pay off in the long run, and make it a goal to defer more each year.
If you work part-time, you may be able to pick up a few extra hours each week. Establish an IRA for your additional earnings.
Annual increases can also be slated for IRA contributions.
It’s also important to understand how to invest your retirement nest egg. You don’t have to become an investment expert. If you have an employer sponsored plan, ask about tools that may be available to help you select your investment options and determine the allocation approach that is best for you. Consider your age, your risk tolerance and the level of interest you have in selecting and monitoring your investments.
If you are married and providing care for a family member, you may be eligible for a spousal IRA. Contributions can come from income earned by you or your spouse.
If you are nearing the eligibility age for Social Security benefits, you will want to understand the filing options available to spouses. Depending on your situation, there are approaches that can make a big difference in your total household lifetime benefits, and the amount that is paid to a surviving spouse.
Retirement planning seems challenging, but the good news is that there are many resources available to help you. A financial advisor can also help with your planning. Once you start actively preparing, it’s often the small but continual steps that make a big difference over the long term.
In today’s heavily regulated market, tax benefits and investment dividends achieved through retirement plans can be significant. Many plans offer immediate dollar-for-dollar tax savings. But the rules are diverse and complex.
Cosmo Financial’s expert consultants can help you achieve your financial objectives through a host of wealth building investment strategies and a full range of variable products to help complement your current financial position. Call for an appointment at your convenience.
Employee Benefit Programs
Employer sponsored retirement plans can be a vital asset to your company as well as your employees providing significant tax incentives to save and invest for retirement. Cosmo Financial works closely with both small and large employers in the corporate and non-profit sectors to identify the proper plans for your company. Our broad range of programs include:
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The information provided here is for informative purposes only and is not intended to provide legal or tax advice. Should such advice be sought, a competent professional should be consulted.
1 Baby Boomer & GenX Women: Retirement Readiness and the Role of Women Financial Advisors, www.irionline.org, May 2014.
2 Fifteen Facts About Women’s Retirement Outlook, © Transamerica Center for Retirement Studies, the LIMRA/LOMA Secure Retirement Institute, www.limra.com/Secure_Retirement_Institute, 2015.