If you think it’s more challenging for women to retire than men, you are correct. The good news? The first step to recovery is admitting you have a problem. So let’s break down the main factors that contribute to this, then we can work on a solution.
Problem 1: Statistically speaking…it’s a numbers game
The average American white male can expect to live 76.2 years, whereas the average American white female has a life expectancy of 80.9 years. Let’s assume for the sake of clarity that the average American woman wants a retirement income of $50,000 a year. She would require an additional $235,000 at retirement.
Here are some more numbers: A recent report by the U.S. Bureau of Labor Statistics revealed that full-time wage and salary working women earned 82% of that earned by full-time wage and salary working men. The bottom line is that lower wages earned means that a woman putting the same percentage of their salary into a 401K or other retirement plan as a man will always come up short. In order to make up the difference, she’ll have to find the dollars somewhere else in her budget.
Problem 2: Caretaking can take its toll on retirement progress
Women are far more likely than men to have their wage-earning years interrupted by the need to care for a child and/or a parent. In addition to earning less dollar-for-dollar than men, women often have spans of time when they are contributing less or not contributing to their retirement savings at all due to the need to take a temporary leave from their career.
Problem 3: Cautious by nature
Women have the tendency to be more averse to risk than men when investing. While there comes a time when caution is prudent, taking that approach over the long-term can really hurt your rate of return and make it difficult for you to reach your financial goals for retirement.
A survey by Transamerica Center for Retirement Studies reported that three out of four women admit that they do not know as much as they should about retirement investing, and half said that they are not confident in their ability to retire comfortably.
For most women, their natural response is to put off dealing with the process because they are intimidated and don’t know where to begin. Don’t be discouraged by these common challenges for women and retirement! Use this knowledge as inspiration to take the next steps toward reaching your financial goals.
Step 1: If you don’t already have a retirement account, set one up immediately. Saving even a small percentage to start with will help you set a foundation for future growth.
Step 2: If you already have a retirement account, begin to increase the amount you are contributing by 1% each year until you have reached the maximum.
Step 3: Be strategic by consulting a professional or running your numbers through an online calculator to determine how much you realistically need to save for retirement to live comfortably.
Working with a CERTIFIED FINANCIAL PLANNER™ that you trust can help you get on the right track quickly, and you don’t have to have everything together or a lot of money to get started. Take it one step at a time, and, before you know it, you’ll be on your way to developing your nest egg!
Julie Newcomb, a CERTIFIED FINANCIAL PLANNER™ in Orange County, CA, specializes in financial planning for women. As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.