Studies have largely shown over the years that women tend to live six to eight years longer than men. This means they'll need a healthy nest egg that will stretch those extra years. However, historically women have looked at retirement investment very differently than men and, as a result, don't have the cushion they could have when the time arrives.
Women tend to undersave for retirement
If you haven't put much effort into saving for retirement, you're definitely not alone. A recent AARP survey found that more men than women consider retirement savings their highest priority.
The findings revealed that men ranked retirement as their top financial priority while women placed retirement savings as fifth on the list. The one exception was married women without children; they also ranked retirement savings at the top.
Key mistakes women make
Why do women tend to push off establishing or investing in retirement? A number of things likely come into play, such as varying financial needs. Women are widely believed to be more inclined to worry about current bills, debts and immediate family needs before retirement. This mindset leads to the inevitable delay of thinking about retirement. Here are some other key mistakes women make.
- Retiring when their husbands do. Since many women have taken off time to have children, losing valuable years to work as a result, they've invested less in retirement. Additionally, since women do live longer, they lose out on building retirement if they leave the workforce early (especially women who are younger than their husbands).
- Being intimidated. Financial jargon can be overwhelming and intimidating, which can lead to delays in retirement planning.
- Saving instead of investing. Many women tend to go the simplest route and stick to depositing any extra cash in a savings account. The problem is, very little return comes from this investing decision.
- Not automating. Today's investment options come with many digital options, and it takes the burden out of physically having to remember or post transactions. Automating ensures your transfers get done as scheduled.
- Watching fluxes too closely. Examining the ups and downs associated with investments can put you on an emotional roller coaster and increase fears associated with diverting money toward retirement.
- Not putting investments in her name. Many women tend to let their husbands take care of investing and, as a result, accounts are in his name or joint accounts.
Also, the glass ceiling hasn't quite yet shattered to the point where women and men make equal salaries. Many women may simply feel they don't have enough cash to spread around. The good news is women can seek to close this gap by strategically planning for retirement instead of putting it off.
Things women can do differently
Women don't generally view themselves as investors and, as a result, even if they have money to invest, they don't tend to invest. The first thing they can do is drop that mindset and reframe their thinking to be geared more toward retirement savings.
- Make a commitment to save. Calculate an amount that is reasonable and immediately divert this money regularly toward retirement. If possible, cut some corners on daily spending and move the savings to retirement instead.
- Set up personal accounts. If you don't have any retirement accounts in your name, be sure to get that rectified ASAP.
- Keep investing simple. For instance, you don't have to jump into intimidating stock market options to start. You can begin easily by setting aside a dedicated amount and diverting it to an IRA.
- Seek help when investing for retirement. Through a firm, you can receive personalized investment and retirement advice, and they'll help you to set up an actionable plan, either with a human or digitally. Many employers have contracted with professional firms, and GuidedChoice may even be one of your options.
- Contribute more to 401(k). If an employer is matching amounts, be sure to match those dollars so you can receive the maximum value of your investment.
- Be bold and ask for a raise. Studies consistently show women lack the confidence to advocate for themselves when it comes to more money.
- Be confident about making investment choices, and be willing to be a little less adverse to risk. You can diversify your investments to spread any risk.
- Maximize investing by opening tax-deferred accounts. An important benefit to putting off paying tax is you can minimize the amount due because chances are when you retire, you'll be making less total adjusted income, meaning you'll pay less in taxes when you begin withdrawing. This is a good option, even if you're already saving through a 401(k).
- Continue to work. Even if your husband retires, you can continue to work and take extended vacations, or work part-time (today's gig-centric society comes with many flexible work options).
By taking these proactive steps, you can significantly boost your future financial security and be sure your basic needs and desired standard of living are met.
Have you thought about your retirement plan?
It may feel like your retirement is a long way off, but it's never too early to start planning. Social Security is no longer a reliable retirement plan, and it's a good idea to explore other options to secure your financial future.
GuidedChoice firmly believes in financial freedom for all. We pride ourselves in providing personalized service and advice to our clients that are only in their best interest. To learn more about how we can help you plan your future, ask your employer if GuidedChoice is offered through your employer benefits program.