Women and Retirement: Are you saving enough?

Did you know that women are less likely to be in the workforce than men, and more likely to work part-time versus full-time?¹  According to the U.S. Department of Labor, this is because women are more likely than men to stop working or reduce work to take care of family members.

While taking care of loved ones — whether young children, aging parents or a family member with a disability — is often a top priority for women, working fewer hours or fewer years in the workplace translates to contributing less to requirement savings, leaving women less financially secure as they reach retirement age. A discouraging fact is that today, 50% of women ages 55 to 66 have no personal retirement savings at all.²

Compound interest means saving a little early can add up to a lot later.

Since life expectancy for women in the U.S. is age 79, it’s critical to start planning for retirement early. If you’re in one of your first jobs, you may think that saving a small amount of a small income isn’t worth it, but this is far from the case.

Compound interest means that you’re earning interest not only on the money you’ve saved, but also on the interest that has accrued on that money.

And if you haven’t started saving yet, it’s never too late to start. Begin by prioritizing saving each month; you can also take a closer look at your expenses and disposable income to see if there are savings you could gain by opting out of streaming services, or setting a hard spending limit on dining out, for example.

Participate in your employer’s retirement plan.

If your employer offers a retirement plan such as a 401(k), join it as soon as you can and contribute as much as the plan allows. Many employers will match your contribution anywhere from 50% up to 100%. This means if you’re contributing 6 percent of your salary and wages, your company will contribute 3% and potentially even more. Think of this as free money - an extra 3% that you get to enjoy upon retirement. And like the compound interest video showed, you’ll be surprised how quickly the savings add up!

Understand the impact that leaving a job may have on your retirement savings — before you quit.

Some companies require you to “vest,” meaning you have to work for the company for a certain number of years before you can receive your full benefits. It’s crucial to talk to the personnel office, your retirement plan administrator, or your union representative to understand the impact of making a job change on your savings before you quit, as it could be that you’re within a few months of reaching vesting and that you’d be leaving money on the table by quitting.

Consider “rolling over” your retirement savings.

If you are fully vested or there is no vesting requirement at your company, you can often “roll over” your plan savings into an Individual Retirement Account (IRA) upon leaving the company that offered the plan. Consolidating your savings into IRAs at one financial institution is particularly helpful if you’ve worked at many different employers. It means you can see your savings in one snapshot, and also helps your financial institution understand what offerings will best serve you.

Get to know your IRAs: Especially if you work part-time, are part of the gig economy, or are self-employed.

Speaking of IRAs, there are many different types of IRAs, each designed to provide different options and tax advantages for savers. The IRS sets how much you can contribute each year.

• Traditional IRA: Typically, traditional IRA contributions are tax-deductible, meaning you will not be taxed on any funds you contribute. When you withdraw the funds in retirement, they are taxed as income.
• Roth IRA: Roth IRAs are the complement to Traditional IRAs — contributions are made with after-tax funds and are not tax-deductible, but earnings and withdrawals upon retirement are tax-free. In other words, you can choose whether you want to be taxed now (with a Roth IRA) or later (with a Traditional IRA).
• SEP IRA: SEP IRAs allow small businesses and self-employed individuals to make retirement plan contributions into a traditional IRA established in the employee's name. These are ideal for women who work part-time, for themselves, or work multiple jobs in the gig economy, as examples.
• SIMPLE IRA: These are available to small businesses that do not have any other retirement savings plan. The SIMPLE — which stands for Savings Incentive Match Plan for Employees — IRA allows employer and employee contributions, similar to a 401(k) plan, but with simpler, less costly administration and lower contribution limits.

Pay yourself first. Your future self will thank you.

For parents, it can be very difficult to navigate saving for both retirement and your children’s education. there are a number of things to consider, but one concept is especially pertinent for mothers who may have less opportunity to save: while students have a number of financial options to assist with college costs, you are the only one who will contribute to your retirement savings.

For those considering saving for your children’s education, the concept of compound interest still applies. 529 Plans are state-sponsored, tax-advantaged educational savings accounts that you can draw from to pay for approved higher education expenses like tuition and even K–12 expenses. Your withdrawals are exempt from federal income taxes which can represent a significant savings.

Plan for retirement, so that when the time comes you actually can.

The bottom line is that you are the only one who can guarantee your own financial future, by starting to save early and making it part of your daily life. After all, when it comes time to retire, you want to have the ability to do so.