Come retirement age, women are typically in much worse financial shape than men. Even though women now account for about 50% of the workforce, they still make less than men (several hundred thousand dollars to upwards of $1 million less over a lifetime), and because women take time out of the office to care for kids and aging parents (women leave the office for an average of 12 years!), they have a difficult time getting back into the workforce and often must resort to part-time work. No benefits, no pensions.
All of that is compounded by the fact that women live longer than men - about five to six years longer, on average. That makes affording retirement seem downright impossible. But it doesn't have to be that difficult. Ken McDonnell, the director of American Savings Education Council (ASEC), offers his tips on how women can maximize their chances of retiring comfortably:
Crunch the numbers
A survey by the Employee Benefit Research Institute (EBRI) shows that men say they need a million dollars or more for retirement; women, on the other hand, say they don't know how much they need. How can you save for retirement if you have no idea how much you'll need? First stop: EBRI's Ballpark E$timate worksheet. The two-page worksheet takes complicated issues like projected Social Security benefits, pensions, and earnings assumptions into consideration then calculates how much of your income you should be saving each year.
Boost contributions to your 401(k)
If you think you'll come up short - and chances are, you will, as experts say you need to replace 85% of your pre-retirement income to live comfortably in retirement - boost contributions to your employer-sponsored 401(k), contributing at least enough to capture the company match. Free money should never be left on the table!
Consider other savings vehicles
Nearly half of Americans aren't offered an employer-sponsored plan, according to the EBRI. So you have to consider other options, such as IRAs and mutual funds. Does your employer at least offer direct deposit? If so, send some of your earnings toward your retirement account of choice. This is the easiest way to save: you won't miss money you don't see.
Focus, focus, focus!
Women may be more concerned/worried about retirement than men are, but they are not taking appropriate action in terms of retirement planning. Get this: more than one-third of women (34%) are strictly concerned with just getting by, having just enough to cover their expenses every month, according to Transamerica Center for Retirement Studies. We need to be more aggressive, confident, and strategic!
In order to afford retirement, we're going to have to work longer. Almost everyone -- 91% of men and 84% of women -- is onto this one. Any idea how beneficial this is to your bottom line? According to the Center for Retirement Research at Boston College, if you delay your retirement for just three years beyond age 62, you could increase your nest egg by more than a third. That's because you'll save for retirement longer, postpone your withdrawals, receive more from Social Security and any pension, and you'll qualify for Medicare, which would eliminate the need to buy costly private insurance.
Intro to different retirement accounts
What does it mean to have a 401(k)? IRA?View Course »