Women may have to work harder to overcome the retirement savings gap.
When it comes to retirement saving, many women lag behind many men. Historically, that has been the case. A recent study by Student Loan Hero offers more evidence of the problem –While 29% of men polled in the study indicated that they have no retirement savings strategy, an alarming 48% of women also answered that they have no retirement savings.
On top of everything else, there is also the income disparity for women in the United States, where women are earning 37% less per year than men. With all these factors, it’s easy to understand both why women find challenges in retirement saving and why these challenges might seem, at first, insurmountable. It could create a frustration that might cause one to avoid learning what needs to be done to begin saving for retirement. Education and talking with a financial professional, however, have the potential to give even the most frustrated retirement saver a boost.
How can women plan to address this? Here are a few positive steps you can take to fill the retirement savings gap.
Find out where you stand in terms of savings now. A simple retirement planning calculator (there are many available online) can help you see how much more you need to save, per year and over the course of your career. Retirement planning calculators are for informational purposes only and should not be considered a substitute for a more comprehensive retirement evaluation. A financial professional can help.
Save enough to get the match. If your employer will match a percentage of your retirement plan contributions per paycheck, strive to contribute enough to your plan each paycheck, to ensure that the match occurs.
Ask about automatic escalation. Some workplace retirement plans have this option, through which you can boost your retirement contributions by 1% a year. This is a nice “autopilot” way to promote larger retirement nest eggs.
Ask for a raise. A higher salary means more money to put toward your savings effort.
Make tax efficiency one of your goals. Consult a financial professional about this, for there are potential advantages to having your money in taxable, tax-deferred, and tax-exempt accounts. For example, when you contribute to a retirement plan, you make tax-deferred contributions. This lowers your taxable income today; the distributions from those accounts will be taxable in retirement.4
Some of these suggestions you will do on your own, but it may also be a good thing to speak to a financial professional you trust and create a savings strategy that will be of particular help for you to tackle your own retirement savings gap and meet your goals for the future.