Why Women Should Save More for Retirement
By Angela Dorsey
Retiring is inevitable, but retiring in comfort must be planned for and saved toward. As women, we have unique challenges to conquer when we plan for retirement. We often live longer, consistently earn less than men, and may even spend less time in the workforce overall. Many women have fears about retirement.
Those factors impact our ability to save for retirement, so we must be proactive. I’ll share the key reasons why women should save more for retirement than men, and what you can do to start putting away more money.
Longer Life Expectancy
Women often enjoy longer life spans than men, so we need extra money to support us throughout retirement. Recent data from the Centers for Disease Control found that women have an average life expectancy of 79.1 years. That’s almost six years longer than the average life expectancy for men of 73.2 years.
In the unfortunate event of outliving your spouse and becoming a widow, you may also need to consider how your savings and finances may change. The last thing you’ll want to worry about during this final chapter is outliving your retirement savings.
The Gender Pay Gap
With the woman's pay gap, even if you’ve worked full-time for most of your life, you’ve likely been paid less than men for the same type of work. As of 2022, the U.S. Department of Labor reports that women earn just 83.7% of what men make. Those stats are even lower for African American and Latina women.
Planning for retirement as a woman means strategizing around a significant gender pay gap. Working with less money requires women to be more diligent about retirement planning.
Time Out of the Workforce
Recuperating after childbirth and being present for the beginning of your children’s lives often results in months of lost or reduced income. Some working mothers even transition to stay-at-home moms for a few years. This time out of the workforce often results in your retirement planning getting pushed to the back burner.
In addition to the time out of work for maternity leave, many women are also responsible for the care of their elderly relatives. The Institute on Aging reports that 75% of caregivers identify as women. Whether you’re taking time off of work to care for your children or an elderly relative, it could take away years of saving money and earning interest on your retirement accounts. While you’re taking care of everyone else, it’s essential to prioritize taking care of yourself by saving toward your retirement.
Just because you face different challenges as a woman doesn’t mean you won’t be able to retire comfortably. It means you’ll have to strategize differently. Here are some tips for saving more for retirement.
1. Start Early
The more time you have to save for retirement, the better. Even small regular contributions to your retirement accounts can grow significantly over time. If you haven’t started saving yet, opening a retirement account is relatively simple—and something you can cross off your to-do list today. Set regular contributions to your account to get started.
2. Maximize Your Retirement Contributions
Many employers offer a 401(k) or another type of retirement savings plan where they match your contribution up to a certain percentage. If your employer offers this option, you’ll want to at least meet their contribution match to make the best use of the retirement plan. As long as you’re fully vested with your employer, you’ll get to take your money plus the match money when it’s time to retire.
3. Work With a Financial Advisor
Choosing a financial advisor who specializes in women’s retirement planning can help you make smart decisions about saving for retirement. These specialists help you create a custom retirement plan that addresses your unique goals and needs. A financial advisor can even help you develop a strategy to work around obstacles like a longer life expectancy and your time out of the workforce.
A Retirement Plan Designed to Help Overcome Your Challenges
Women face unique challenges that other retirement planning might not account for. We live longer, earn less on average, and sacrifice work to care for loved ones. With proactive planning and smart investment strategies, you can overcome these challenges to build a retirement you’ll enjoy.
Are you ready to work with a financial advisor who helps women plan for retirement? Schedule a free introductory 30-minute phone call or reach us at (310) 370-7776 or angela@dorseywealth.com.