Women face special challenges when planning for retirement. Because their careers are often interrupted to care for children or elderly parents, women may spend less time in the workforce and earn less money than men in the same age group. As a result, their retirement plan balances, Social Security benefits, and pension benefits are often lower. In addition to earning less, women generally live longer than men, and they face having to stretch limited retirement savings and benefits over many years. To meet these financial challenges, you'll need to make retirement planning a priority.
Begin saving now
To maximize your chances of achieving a financially secure retirement, start with a realistic assessment of how much you'll need to save. If the figure is substantial, don't be discouraged—the most important thing is to begin saving now. Although it's never too late to save for retirement, the sooner you start, the more time your investments have to grow.
Save as much as you can--you have many options
If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), join it as soon as possible and contribute as much as you can. It's easy to save because your contributions are deducted directly from your pay, and some employers will even match a portion of what you contribute. If your employer offers a pension plan, find out how many years you'll need to work for the company before you're vested in, or own, your pension benefits. Women struggling to balance work and family sometimes shortchange their retirement savings by leaving their jobs before they become vested in their pension benefits. Keep in mind, too, that because your pension benefits will be based on your earnings and on your years of service, the longer you stay with one employer, the higher your pension is likely to be.
Most employer-sponsored plans allow you to choose from several investment options (typically mutual funds). If you have many years to invest or you're trying to make up for lost time, give special consideration to growth-oriented investments such as stocks and stock funds. Historically, stocks have outperformed bonds and short-term instruments over time, although past performance is no guarantee of future results. However, along with potentially higher returns, stocks carry more risk than less volatile investments. A good way to get detailed information about a mutual fund you're considering is to read the fund's prospectus. It includes information about the fund's objectives, expenses, risks, and past returns. A financial professional can also help you evaluate your retirement plan options.
Save for retirement--no matter what
Even if you're staying at home to raise your family, you can—and should—continue to save for retirement. If you're married and file your income taxes jointly, and otherwise qualify, you may open and contribute to a traditional or Roth IRA as long as your spouse has enough earned income to cover the contributions. Both types of IRAs allow you to make contributions of up to $4,000 annually for 2006 and 2007 (if you're age 50 or older, you're allowed to contribute even more—up to $5,000 annually for 2006 and 2007).
Plan for income in retirement
Do you worry about outliving your retirement income? Unfortunately, that's a realistic concern for many women. At age 65, women can expect to live, on average, an additional 19.8 years.
- In addition, many women will live into their 90s. This means that women should generally plan for a long retirement that will last at least 20 to 30 years. Women should also consider the possibility of spending some of those years alone. According to recent statistics, 43% of older women are widowed, 11% are divorced, and approximately half of all women age 75 and older live alone.
- For married women, the loss of a spouse can mean a significant decrease in retirement income from Social Security or pensions.
