How women can close the retirement savings gap

Women have extra burdens on their retirement incomes, along with wage inequality and careers that are often interrupted. This means they have to be especially diligent about retirement planning. 

Melanie Stetson Freeman/Staff/File
Carol Suplicki, center front, uses small weights for conditioning at North Oaks, a continuing care retirement center for seniors.

Many Americans don’t save enough for retirement, but women face particular challenges. There are often extra burdens on their retirement incomes, including longer life expectancies, greater health-care costs, and a greater likelihood that they’ll provide care for their children or parents. At the same time, their ability to save is often reduced due to wage inequality and careers interrupted to raise children.

This means women have to be especially diligent about retirement planning. Here are a few ways you can make sure you’re on the right path:

Save what you can now

The best way to have enough money in retirement is to plan ahead — way ahead. Start saving as soon as possible, even if you haven’t sketched out a plan yet. Saving early is even more important for women because childbirth and child-rearing might interrupt working years and limit lifetime income.

Starting earlier will give you more flexibility, should you want to work less or add another person to the mix. It also means you’ll need to save less each month. For example, if you start saving $200 per paycheck at age 20, and have an investment return of 4.5% per year, you’ll have $77,568 saved at age 33. But if you wait to start saving until you’re 26, you’ll need to save $330 a month to have the same amount in your account at age 33.

Estimate your retirement income needs

People are typically told that in retirement they should plan to spend 70‒85% of what they currently do. In my experience, though, people often spend just as much or more in retirement as they did while they were working. And because women tend to live longer than men do, they often need to save even more.

You’ll also have more free time for activities and vacations during retirement, or you may need to personally cover expenses that your employer once paid, such as your phone bill or some meals. Conversely, child- or mortgage-related expenses may drop off around the time you retire.

To estimate your retirement-income needs, create a spreadsheet with one column listing all of your current expenses, and another column listing your projected expenses in retirement. A chart like this should help you envision how your expenses will change over time, either as a change in dollar amounts or as a percentage change.

Unexpected situations can arise, of course, but it’s still important to guess how much you’ll need to support your lifestyle once you stop working.

Calculate how much you should be saving

Once you have an idea of how much you will want to spend annually, you can figure out how much you need to save to achieve that number, starting now. This step alone would put you ahead of most Americans. In a 2013 study by Ameriprise, only 23% of respondents had even tried to calculate how much they would need to save for retirement.

Online calculators can help you double-check your estimates and start making a strategy. Most online retirement calculators will consider factors such as inflation and investment rates of return. Try the calculators at NerdWalletVanguard or T. Rowe Price to get started.

Maintain your skills and contacts

If you need to leave the workforce, whether it’s to raise children or care for aging parents, help ensure that you can return to it successfully by keeping your skills and professional networks fresh.

Consider taking professional-development courses, and attend mixers and stay in touch with colleagues to keep your network active. Making time for these steps can be a challenge, but even a relatively minimal time investment can pay dividends when you’re ready to re-enter the workforce.

Consider long-term care insurance

Women’s retirement needs projections should cover long-term care — such as nursing homes, assisted living, or in-home care services — in case they become incapacitated later in life. The average 65-year-old has a 70% chance of needing long-term care at some point in his or her life, according to the U.S. Department of Health and Human Services. Women need professional care more often than men do because of their higher incidence of chronic illness and longer life spans — which means they’re more likely to be living alone by the time they need help.

Because long-term care can be expensive, you might want to buy some coverage through a long-term care insurance policy. Premiums are cheaper the younger you are when you buy the policy. A good time to start thinking about this is in your mid-50s.

Ensuring that you have a reasonable income during retirement is your responsibility. Be proactive, and don’t expect someone else — like your husband — to work it out for you. The sooner you get started, the better you can plan for the future and make any changes necessary before you retire.

Sabrina Lowell is a financial advisor and COO with Mosaic Financial Partners. Take Mosaic’s 2016 Financial Fitness Challenge to make sure you’re on the right track with your money.

Learn more about Sabrina on NerdWallet’s Ask an Advisor.

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