Retirement planning is an important but often overlooked task. Women need to think about it, as they tend to live longer than men and are more likely to end up in poverty during retirement. There are various reasons why women are still struggling to save for retirement. Here are some of them.
Despite women’s equality being a mainstream conversation topic, women are still paid less than men for the same job across many industries. Data from the Institute for Women’s Policy Research shows that in 2020, women earned only 84 percent of what men earned. The same study found that if the current pace of change continues, it will take until 2059 for women to earn what men do finally.
This gender pay gap means that women have less money for retirement. They also have more difficulty catching up on retirement savings later in life.
Longer Life Expectancy
Women tend to live longer than men, which means they need more money to cover their costs in retirement. According to data from the World Health Organization, the life expectancy for a baby born in 2020 is 73 years for boys and 79 years for girls. That’s a six-year difference.
Not only do women need more money to cover their longer lifespans, but they also need to account for the fact that they’ll likely spend more time in retirement than men.
If you’re struggling to get your finances in order, here are some ways you can prepare for retirement:
Start saving early
The earlier you start saving for retirement, the better off you’ll be. If you can’t afford to save a lot each month, that’s okay! Start with what you can and gradually increase the amount as your income increases. The important thing is to get into the habit of saving now, so it’s easy to keep doing it later.
Invest in yourself
Investing in yourself includes things like getting a good education and staying healthy. The better educated you are, the more likely you are to earn a good income. And if you’re healthy, you’ll be less likely to need expensive medical care later in life. Know that medical expenses are the reason why the majority of Americans are in debt. Both of these things will help you have more money to save for retirement.
If you want to save more money for retirement, take advantage of any employer benefits available to you. Here are some of those benefits.
If your employer offers a 401(k) or another retirement plan, ensure you’re contributing enough to get the maximum employer match—that’s free money! Also, take advantage of your employer’s other benefits, such as tuition reimbursement or stock purchase plans.
Medicare is a government health insurance program that provides coverage for people 65 and older. If you’re not already eligible for Medicare, you’ll need to sign up for it when you reach retirement age. Additionally, don’t forget to ask your employer for a Medicare home health care package. This package can save you a lot of money on out-of-pocket medical costs once you’ve reached your senior years. It can also help you stay healthy and independent in your own home.
In addition to Medicare, you may also be eligible for health insurance through your employer. If you’re not already covered by an employer-sponsored plan, sign up for one as soon as possible. This will help you avoid costly medical bills later in life.
Individual Retirement Accounts
If you don’t have access to an employer-sponsored retirement plan, you can still save for retirement on your own. Individual Retirement Accounts (IRAs) are a great way to do this. You can open an IRA at most banks and brokerage firms. And, if you qualify, you may be able to deduct your IRA contributions from your taxes. The most popular IRA is the Roth IRA.
With a Roth IRA, you fund your account with money that’s already been taxed. Your earnings grow tax-free, and as long as you meet specific requirements, you don’t have to pay any taxes when you withdraw the money in retirement. With a traditional IRA,you get a tax deduction for your contributions now. But when you retire and start taking withdrawals from the account, those distributions are taxable.
Take Care of Your Credit Score
Your credit score is important because it affects the interest rate you’ll pay on loans—and the higher your interest rate, the less money you’ll have to save for retirement. You can check your credit score for free once a year by requesting a report from one of the major credit bureaus (Experian, TransUnion, or Equifax). If your score is low, there are things you can do to improve it, such as paying your bills on time and keeping your credit card balances low relative to your credit limits.
Retirement planning is an important task that everyone should undertake by taking some simple steps now—such as starting to save early. Once you do these things, you can set yourself up for a comfortable retirement down the road.