Saving
for retirement remains one of the most important financial goals for
both men and women. While saving for retirement is a huge endeavor for
everyone, women face a variety of unique challenges and obstacles that
should be taken into account in their long-term planning.
First of all, and perhaps most importantly, women, on average, live longer
then men. Therefore, they will simply need more money during retirement
then men. According to a July 2005 report on www.msn.com, women at age
65 are expected to live another 19.5 years, while men are expected to live
16.6 year after age 65. But according to the same MSN report the demographers
predict that many women alive today will live into the 90s. This means
many women will need to be prepared financially and emotionally for a retirement
lasting, in some cases, over 30 years.
Another challenge women face is that they typically have fewer years in
the workforce. According to the Social Security Administration, the average
man retiring in 2000 had 44 years of working under his belt, however the
average woman had only 32. This is because women are more likely than men
to take time off from work to have and raise children and sometimes interrupt
their careers to care for aging parents.
Work interruptions have significant financial consequences. For instance,
women’s contributions to Social Security cease when unemployed, ultimately
reducing the Social Security benefit when they retire. According to the
Social Security Administration the average Social Security benefit check
for women was $774 per month compared to $1,008 for men.
Work interruptions can also make it more difficult for women to compete
for promotions and salary increases. For that reason, and others, women’s
annual salaries are, on average, approximately 75 percent of men’s.
Although the wage gap has been decreasing over the last few years, the
median income for full-time working women was $30,420 per year in 2004,
compared to $40,136 for men, according to the July 2005 MSN report.
Due to lower earnings and fewer years working, women are less likely to
be saving toward their retirement then men. According to the “2005
Retirement Confidence Survey” from the Employee Benefit Research
Institute, 59 percent of women are currently saving toward retirement compared
to 65 percent of men. The same study shows that only 36 percent of women
participate in workplace retirement plans, such as a 401(k)s, as compared
to 48 percent of men.
Yet another challenge is that women tend to be more conservative investors
then men. A 2004 study called the “Financial Gender Gap” found
that women have a lower risk tolerance and therefore tend to be more conservative
with their investments. Although there is a place for conservative investments
in most portfolios, investing too conservatively (across the board) can
lead to decreased savings and diminished retirement investments.
Here are some financial tips specifically geared towards women to help
them better prepare for their retirement:
Make saving a priority: Some women get sidetracked when balancing many
financial obligations, caring first for their family, such as their children
or aging parents. They should remember to focus on taking care of themselves
and not let saving for their own retirement slide.
Invest more: Women should actually consider investing more than their male
counterparts to account for their longer lifespan and smaller earnings.
Women must take into consideration both their risk tolerance and time-horizon
so they can invest appropriately toward their goals.
Contribute to Retirement Plans: If eligible and your employer provides
a retirement savings plan, such as a 401(k), do not delay signing up. Start
as soon as you are eligible and contribute as much as you can, especially
if your company has a matching program. You may want to augment your 401(k)
savings by contributing to an Individual Retirement Accounts (IRA). An
IRA is also a good option if your company does not offer any retirement
savings accounts.
Save, even if you are not working: If you have taken or are planning to
take time off from work to raise kids or care for aging/ill family members,
try to continue to save money in your IRA accounts. Married people filing
jointly are able to make a deductible IRA contribution based on their earnings.
Delay your retirement: If you are nearing retirement and feel that you
are not financially prepared, you may want to consider delaying your retirement.
By delaying your retirement, you continue to earn income and postpone taking
withdraws from your retirement savings which allows your assets to continue
to compound and grow. Delaying will give you more time to save and contribute
to your Social Security benefit. In fact, for each year you delay beyond
65 years old, your Social Security benefit will increase eight percent,
according to recent financial report on www.ivillage.com.
Seek help: Meet with a qualified financial advisor who can help you create
a personalized financial plan which includes retirement savings and options
designed specifically for your unique needs and challenges.
This information is provided for informational purposes only. The information
is intended to be generic in nature and should not be applied or relied
upon in any particular situation without the advice of your tax, legal
and/or your financial advisor. The views expressed may not be suitable
for every situation.
Ameriprise Financial Services, Inc. Member NASD. American Express Company
is separate from Ameriprise Financial Services, Inc. and is not a broker-dealer.
info: 704-987-9794 . email:lynn.j.davidson@ampf.com
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