5 Things Mothers Should Tell Daughters About Money And Retirement
Older women have a wealth of experience and information to offer to younger women. In this checklist, we urge you to share your money experiences with a daughter or another young woman. Helping a young woman develop a strong financial plan is a lifetime gift. Here are WISER’s five money tips to share with a younger woman.
1. Women live longer and earn less than men, so it is very important to start saving early and stay focused on retirement savings throughout your career.
Women earn about $0.77 for every dollar a man earns. A typical 25 year old woman with a college degree will earn at least $500,000 less than a college educated man over a lifetime. Wage discrimination makes it harder for women to set aside funds for retirement, but their longer lifespan makes it important to set aside more money than men. Make a financial plan that includes regular contributions to a retirement account early in your career, and stick to your plan.
2. Saving early pays off.
Compound interest makes it easier to accrue assets, but you need to start saving early to get the full benefits of compound interest. Consider this: a young woman saving $1,000 a year for ten years, from age 20 until age 30, and then saving nothing from age 30 to 58, will have $112,289 at age 58. A woman who starts saving at age 40, and saves $1,000 a year for ten years will have only $29,018 at age 58.
3. Develop good habits when it comes to money.
Get in the habit of having a household budget, developing long and short-term financial goals, saving money regularly and planning for a secure retirement. Living beneath your means is the surest way to acquire wealth. Women who have a budget and savings plan save much more money than women who don’t. With assets, women are better protected from financial calamity when problems occur—unemployment, serious illness, divorce or the death of a spouse are all typical life events that can cause economic disaster for those living on the edge financially.
4. Protect your credit rating.
Pay all of your bills on time, do not charge more than you can afford to pay comfortably and avoid costly predatory loans. Too many people live paycheck to paycheck, without adequate savings. One major reason for this is that they are over their heads in consumer debt. A good credit rating will allow you to buy a home—a major retirement asset-- and to borrow money when you need to at the most competitive rates. Women with poor credit ratings pay much higher interest rates on everything from mortgages to credit cards to personal loans. These costly loans and credit card accounts drain you financially and will keep you from acquiring assets you’ll need for a secure future, including a secure retirement.
5. Make sure you have access to and participate in a retirement plan.
Social Security was never intended to be a sole source of retirement income, yet 25% of unmarried women over 65 have no other source of income to live on other than Social Security. That so many women rely on Social Security as their only source of income is a major reason for the high poverty rate among elderly women. If you are covered by a retirement plan at work, sign up for it and contribute as much as you can. If your employer will match some of your savings, don’t pass it up. If you don’t have access to a retirement plan at work, consider finding a job with better benefits. You can also open an IRA and contribute the maximum amount each year. (This year’s limit is $4,000) Many women find that having regular contributions deducted from their checking accounts is an easier way to stick to a savings plan. Save first in tax-favored accounts—the tax savings will boost your overall savings.
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.
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