For many decades, women have faced greater retirement challenges than men have. Why is this the case? On average women live 5-7 years longer than men, meaning their dollars need to stretch longer. We spoke to four women from different walks of life about their retirement planning journey in order to identify the setbacks that real women face and how they can overcome them.
The Cost of Waiting to Plan for Retirement
We spoke with Marci L., a Board Certified Assistant Behavior Analyst, who is not married and feels that she earns a decent salary. Since she is a contractor with her employer, she does not have the ability to save through an employer-sponsored retirement plan, such as a 401(k). Marci, 31, is not currently saving for retirement, but is actively looking at plans through her credit union. When asked, Marci admitted that she is fine with putting off retirement savings for “a year at most.”
However, Marci says, “I’m nervous that I personally will have no money and would have to 100% rely on my significant other for the first time.”
Marci would like to live an active lifestyle when she is retired, but admits her savings plan to support this vision is “a work in progress.”
It has long been recommended to start saving as early as possible for retirement. But what does “early” mean? Is your 30s early enough? Not quite. When you start saving in your 20s, contributing between ten to fifteen percent of your earnings, you will likely meet your retirement savings goal.
Every decade that you delay your contributions, you will need to put a greater percentage of your earnings towards your retirement plan if you want to reach your desired goal. Take a look at this graph to see how waiting can drastically increase your contribution percentage.
Source: Schwab Intelligent Portfolios
Next Step to Success:
Don’t wait any longer to plan for retirement. Schedule an appointment today with a financial planner. Most financial planning offices offer a no-obligation consultation and will review your retirement goals and expectations, as well as the various plans available to you. Their knowledge and experience allows them to provide you with the best options based on your financial situation.
The Impact of Caregiving on Retirement Security
Next, we spoke with Sally R., 35, a stay-at-home mom who is married to an active duty Naval officer. Sally started saving for retirement at the age of 29, but chose to take a break from working to take care of her two children at home. Now that she is not working, Sally fully relies on her husband for contributions towards retirement savings.
Although her husband is currently the sole contributor to retirement savings, Sally says, “We try to discuss retirement contributions so we both agree on it and select portfolios which we are both comfortable with.”
Currently, Sally’s husband is contributing 12 percent of his monthly earnings to retirement.
Sally is aware of the risks associated with delaying or avoiding retirement planning. She says, “We are trying to save early in order to avoid paying more in the future. I plan to re-enter the workforce and contribute more income when I am able.”
It is incredibly common for women to leave their career or significantly reduce their work hours to care for their children. In fact, a recent survey reveals that 56 percent of women with children under the age of 18 prefer to stay at home. Unfortunately, this break in income takes a hit on their retirement security. In fact, individual lost wages from leaving the work force or reducing work hours due to caregiving equals about $143,000.
Next Step to Success:
Don’t fret, stay-at-home moms! It isn’t impossible for you to save for retirement during a break in your career. Find out more about Rollover IRAs, Spousal IRAs, and Self-Employed Retirement Funds, as well as tips to jumpstart your savings. Staying home with your children is a rewarding decision and doesn’t have to be a road block.
Not Enough Retirement Savings Means No Vision of Retirement
We also took the opportunity to speak with Caroline D., 59, a Remote Customer Service Support worker who is married.
When asked if she is saving for retirement, Caroline says, “Yes, minimally though. We are at the tail end of the baby boomer generation and when we entered the workforce, 401(k)s did not exist, so there was no thought of saving for retirement. There were pensions and social security.”
Caroline has taken the opportunity to save through her employer-sponsored retirement plan that matches a portion of her contributions. “I am only able to set aside the minimum amount,” she admits.
She finds it difficult to imagine her lifestyle after retirement. “[I] expect to always be working, even if it’s only part-time. As I see my parents decline, it is a bigger concern that I may not be able to work up until I die — then what?”
Close to 20 percent of Americans 65 years or older are currently working. The baby boom generation is just now entering retirement and the U.S. is seeing the largest number of older workers than ever before.
A recent report on the economic well-being of U.S households found:
- 38% of Americans will continue to work in some capacity as long as possible
- 42% of Americans either expect to work until the age of 70+ or do not plan to retire at all
Next Step to Success:
No matter how scarce your nest egg may seem, there is still time for improvement. Don’t give up on the thought of retirement altogether. Save what you can. This may mean adjusting your lifestyle now so you can benefit later. Some changes may include: putting a stop to supporting able-bodied, adult children or committing to being debt-free by the time you retire.
You don’t have to work forever, but pushing retirement from 65 to 68 or even 70 can add a considerable amount to your retirement. Also, keep in mind that you can make catch-up contributions to some retirement plans beginning in the calendar year in which you turn 50.
When Life Takes Its Toll on Your Plans
Lynne D., 59, a retired teacher also shared her retirement journey with us. After 33 years of service in the teaching community, Lynne says, “I am so happy to be retired and was fortunate to retire at a relatively young age.”
However, Lynne’s personal situation was unusual in comparison with other people her age.
“I was a widow for five years prior to my retirement. The combined income was divided in half when my husband passed away, as he didn’t have a pension or retirement plan through his work. It was not only difficult to comprehend the loss of my husband, but it was also difficult to comprehend how to financially survive as a single income provider for myself and my family,” says Lynne.
More often than not, we spend a great deal of time planning for retirement, but most people don’t plan for the unexpected such as a spouse passing unexpectedly.
Lynne recommends, “that ‘planning’ is the keyword when saving for retirement. There can be many unpredicted lifestyle changes that can drastically affect your retirement years, thus affecting your savings.”
Next Step to Success:
Prepare for the unexpected by making a contingency plan for the surviving spouse. A life insurance policy can be set up to replace income in the event of an unexpected death. Follow these strategies for using life insurance for retirement.