Retirement watchouts for women
Retirement is intended to be a peaceful phase for older people. But the stress of planning for this phase and building up a 401(k) can sometimes make it feel anything but. Women must be proactive about saving effectively and making up for ongoing financial discrimination. As a woman planning her retirement, here’s what you need to know.
What is the gender pay gap?
Retirement planning for women
After decades of hard work, many older women look forward to the day that they can retire.
Many younger women want to plan in advance for this day, looking after their future selves as well as they can.
A comprehensive financial plan for retirement is essential at any age. It allows goals to be set and achieved and creates contingency plans for any unexpected events that crop up.
Women looking to plan for their retirement should:
Assess their current income and spending habits
Figure out their retirement goals/the kind of retirement they envision (accounting for longer life expectancies)
Start setting savings goals and determining milestones
Invest early and regularly – the earlier a person starts saving, the more they can grow their investment before retirement (wealth managers tend to recommend that people set aside 10-15% of their income for retirement)
Organize their estate and create a plan for major life changes from death to divorce
Protect their assets with safety nets like insurance policies, reviewing them once a year to ensure they continue to provide appropriate benefit levels
How can women protect and maximize their 401(k) and savings?
Unfortunately, and due to the same kind of discrimination that causes the gender pay gap, many women are still financially underprepared and ill-equipped for their golden years.
In retirement, you’ll need to replace 70-90% of your income to maintain a similar standard of living.
The ability to do this will come from taking charge, getting informed, and being proactive about your retirement plan.
You can use a Social Security Retirement Estimator to get an idea of the future benefits you’ll be entitled to based on your earnings record.
This should tell you what you need to do to fill the gap and support the standard of living you’re aiming for in retirement.
There are lots of things to pay attention to in pursuit of this gap-filling goal, like the option of continuing to work to delay collecting Social Security (each year that a claim is postponed after retirement age, benefits grow by 8%, meaning a growth of 132% by age 70) and the difference between variable and fixed annuities.
Women should be creating not just a retirement plan but a diversified, robust retirement plan.
Saving a few extra dollars whenever possible is important. Though these savings might feel minimal in the short term, they could make a significant difference over many years.
In retirement, you’ll need to replace 70-90% of your income to maintain a similar standard of living
Should women watch out for anything when planning their 401(k)?
There are a few mistakes that might impact your 401(k) and overall retirement plans.
If you quit your job, for example, you need to know that you might be leaving money on the table in the form of employer contributions to a 401(k) plan.
Other things for women to watch out for include:
Their employer’s attitude to career breaks for family care reasons – specifically whether this attitude will impact their retirement contributions
The state of their overall finances, including any unpaid debts and the presence/lack of an emergency fund for unforeseen life events and changes
The quality of their investments – it isn’t enough to invest and walk away, as poor investments can have a hugely detrimental effect on a 401(k)
The quality of their tax planning (the advice of an experienced financial advisor can help a lot in this department, as well as with the above)
The balance of their portfolio, which should be addressed quarterly or annually so that assets can be maintained when market conditions change
We’re on hand at Unbiased to give you timely, relevant information that will help you make more confident financial decisions.
Karen is the founder and CEO of Unbiased.com.
Karen Barrett is founder and chief executive of Unbiased, a platform connecting people with trusted, independent financial advice. Karen, has been shortlisted for Scale-Up Entrepreneur of the Year at the Great British Entrepreneur Awards and British Businesswoman of The Year Finalist.