Three Ways Women Can Save for Retirement
According to Forbes, women tend to look at investing as a way to be financially independent and take control of their money, as well as build their financial education and wealth.
However, studies show that almost one-fifth or 19% of working women do not have money saved for retirement. Whether it’s credit card debt, or lack of knowledge surrounding retirement accounts, a large gap exists between men and women when it comes to investing and planning for retirement.
Here are some ways women can take control of their financial planning, and invest for their future.
Save Aggressively – Starting Now
One of the easiest ways to start saving for retirement is through employment – often these options for retirement savings allow you to set up your savings plan, and don’t require a lot of up keeping.
401(k) Plans – If your employer offers a traditional 401(k) plan and you meet the eligibility, you can contribute funds pre-taxes, which means you can invest more of your paycheck without feeling a big hit to your budget.
Employer matching contributions – Many employers include matching-contribution provisions in their retirement plans. If your employer offers to match your 401(k) contributions, be sure you’re contributing enough to take advantage of the full match, otherwise you’re missing out on free money. These additional contributions are also tax-deferred until you withdraw the amount from your retirement account.
If your employer does not offer retirement plans, or you’re self-employed, consider opening an Individual Retirement Account (IRA). There are two options for IRAs:
- Traditional IRA – Contributions to a traditional IRA may be tax-deferred and the investment earnings have the opportunity to grow tax-deferred until you make withdrawals during retirement.
- Roth IRA – Contributions are not tax-deductible, and any future withdrawals are tax-free. Qualified distributions, including earnings, are federal-tax-free if certain holding period requirements are satisfied.
Maximize retirement plan contributions – it’s important to start saving early, so you can maximize your yearly contributions to your retirement savings account. When you reach age 50, you are eligible to contribute beyond the usual limits with catch-up contributions to IRAs and 401(k)s.
It’s never too late to start saving for retirement! The earlier you can start saving money and investing for retirement, the more wealth you will accumulate. As you compound interest, or earn interest on your interest, your savings will grow at a faster rate.
Evaluate your spending – Take a look at your budget to see where your money is going, and see if there are ways to help spend less, for example – try negotiating a lower rate on car insurance, or bring your lunch to work instead of dining out.
Have a long-term plan
Women live longer than men – According to the World Health Organization, women typically live longer than men, so it’s valuable to think past the first few years of retirement, and decide how you will handle long-term expenses.
Experts advise not to solely rely on a spouse or Social Security to financially support yourself for long-term care, and suggest married women should keep an investment account in their own name, and never stop saving money.
Consider delayed retirement credits – Every year you can delay receiving a payment before age 70, Social Security retirement benefits increase a certain percentage each month you delay your benefits beyond full retirement age.
Find a financial advisor you trust
In planning for retirement, it’s important to have a financial advisor you trust, who listens to your needs and knows how to help you pursue your goals. Being involved in your own financial planning helps you understand and evaluate your long-term goals, and the strategy to work towards those goals.
No matter what your stage of retirement planning, learning everything you can about investments and knowing your options can help guide your conversation with a financial advisor, and determine what your needs and goals are.
Wealth Planning for Women: An Insider’s Look at Where to Start, Forbes
10 Tips to Help You Boost Your Retirement Savings – Whatever Your Age, Merrill
3 Essential Retirement Planning Tips for Women, Wealth Management
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Contributions to a Traditional IRA or 401k may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.