Savings

Here’s how women can overcome the lack of retirement savings

The gender wage gap has remained remarkably stubborn for decades and, inevitably, becomes a significant shortfall in retirement.

In 2020, women earned 83 cents for every dollar earned by men, according at the United States Census Bureau. The gap persists despite increases in women’s educational attainment and widens even among high-income workers.

By the end of her career, a woman working full time will have lost $417,400 in income, according to the Center for American Progress.

Compared to their male counterparts, women have around 30% less savings when they retire, according to a separate report from TIAA.

Additionally, “women retire on average two years earlier and live an average of five years longer than men,” said Shelly-Ann Eweka, senior director of financial planning strategy at TIAA..

“Women live longer than men, so they’re going to need a bigger retirement fund, and women earn less money, so it’s harder for them to save,” said Leigh Singleton, director of the financial education of the Monifi banking application.

“That’s the riddle we face.”

To that end, here are Singleton’s top tips for closing the retirement savings gap, once and for all.

1. Know your spending habits

“The first step is to watch where you spend your money,” Singleton said. This will allow you to identify regular expenses that could divert money from your long-term goals.

“Step back and see what’s most important to you — maybe it’s a down payment on a house,” Singleton said.

Once you identify areas where you can cut back, direct those funds to an investment account and slowly increase the amount over time.

The earlier you start, the better off you’ll be, because that money will grow exponentially over time, she said.

2. Budget before buying a house

If you’re saving for a home, which is usually the most important purchase people make in their lifetime, consider the total cost of your housing choice, Singleton advised.

Accessibility at home is almost the worst it has ever been. Due to rising prices and interest rates, the mortgage payment for an average home is now almost $800 higher than it was just before the pandemic began.

On top of that, utility costs, insurance premiums, and HOA fees can add significantly more to the monthly bill.

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To stay within your means, “the most common rule of thumb is that your total housing costs should not exceed 30% of your gross monthly income, which is your total income before taxes and deductions,” Singleton said.

Although buying a home often feels like an emotional decision, treat it like you would any investment, she said.

“Of course, you want to buy a home that makes you feel good, but consider it an asset.”

3. Start planning for your retirement now

“Retirement, for many, seems so far away that it’s easy to put it off,” Singleton said.

Yet, since women are more likely to outlive men, at some point most will become the sole financial decision maker in their lives.

“Whether married or single, women need to assess their situation and plan accordingly,” she said.

The loss of a spouse, second marriages and stepchildren can further complicate key issues such as estate planning, tax planning and long-term financial planning and investing, Singleton warned.

Most experts recommend meeting with a financial advisor to support a long-term plan. Free help is also available through the National Credit Counseling Foundation.