{"id":7896,"date":"2019-12-07T08:27:53","date_gmt":"2019-12-07T12:27:53","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=7896"},"modified":"2020-02-24T20:50:31","modified_gmt":"2020-02-25T00:50:31","slug":"why-its-hard-for-women-to-save-for-retirement","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=7896","title":{"rendered":"Why It’s Hard For Women To Save For Retirement"},"content":{"rendered":"

\"\"<\/a>Still<\/em>. When it comes to a discussion of women and money, the word stops me cold.<\/p>\n

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I\u2019ve been writing about women and money issues for three decades and the concerns, stumbling blocks, and stark reality of a fragile financial future remain virtually unchanged.<\/p>\n

That\u2019s frustrating, frightening, but it\u2019s fixable.<\/p>\n

Read on MarketWatch<\/a><\/strong><\/p>\n

\u201cMy biggest concern is that women are still lagging their male counterparts men \u2014 even millennial women \u2014 in retirement savings as well as their income,\u201d Judith Ward, a senior financial planner at T. Rowe Price told me when I spoke to her.<\/p>\n

We were reviewing\u00a0recent research<\/a> from the no-load mutual-fund company that she discussed discussed<\/a>\u00a0at the Women\u2019s Institute for a Secure Retirement (WISER<\/a>) symposium \u201cWhat Do Women Really Want? A Secure Retirement and Strategies to Achieve It.\u201d<\/p>\n

The largest inequality with income and savings is among working baby boomers who are on the tip of retirement. For working baby boomers, the median deferral rate to contribute to an employer\u2019s 401(k) plan was 7% for boomer women vs. 10% for boomer men, according to the survey.<\/p>\n

But, for Ward, it\u2019s the savings behavior among millennial women that is truly troubling. While retirement is decades away for these women, today\u2019s choices considerably impact their future financial security. The median deferral rate for millennial women was 5% vs. 8% for millennial men. \u201cI was surprised,\u201d Ward says.<\/p>\n

Only 46% of millennial women report they\u2019re confident in investing, according to a Merrill Lynch\/Age Wave report \u201cWomen and Financial Wellness: Beyond the Bottom Line<\/a>.\u201d And about 63% of women ages 18 to 29 say \u2018financial planning is too difficult to even think about,\u2019\u201d says Maddy Dychtwald, co-founder of Age Wave.<\/p>\n

That\u2019s got to change. \u201cMillennial women must get started and at least set enough aside to get an employer\u2019s matching funds,\u201d Ward says. Many companies today offer a dollar-for-dollar match for a percentage of their workers\u2019 contributions, up to a specified percentage of pay, typically 4% to 6%.<\/p>\n

Aim to save 15% of salary, including an employer match, Ward advises. \u201cWhen you\u2019re starting out, you probably can\u2019t do all of that, and that\u2019s OK, you can start at a lower amount, and ramp that up over time,\u201d she says. \u201cThe greatest asset you have is time. And that compounded growth can really be magic.\u201d<\/p>\n

Here\u2019s quick refresher on why saving is nonnegotiable for women:<\/strong><\/p>\n

\u2022According to the Pew Research Center, more women (40%) than men (24%)\u00a0report taking \u201csignificant\u201d amount of time off<\/a>\u00a0to care for children or family members. Those workplace interruptions cause them to lose possible raises, lower how much they\u2019ll collect from Social Security and gives them fewer years to stash away money in a retirement plan at work (and get contributions matched by their employers).<\/p>\n

\u2022On average, women live longer than men in retirement. The average American man will live to age 76, according to the latest data from the\u00a0Centers for Disease Control and Prevention<\/a>\u00a0(CDC), while the average woman in America will live to age 81.<\/p>\n

\u2022The pay gap is alive and well. Women still earn less than their male counterparts. In 2018,\u00a0women earned 85% of what men earned<\/a>, according to a Pew Research Center. Similar to past trends, the T. Rowe Price study found that millennial women make less money than their male counterparts\u2014a median annual income almost $30,000 less than the median for men.<\/p>\n

My research has also shown that women tend to be self-employed, contract or part-time workers, or work in nonprofits or for small businesses that might not offer a retirement plan for their employees. \u201cThe hard part is for those who don\u2019t have access to workplace plans,\u201d says Cindy Hounsell, president of the Women\u2019s Institute For A Secure Retirement (WISER).<\/p>\n

Moreover, women often work in career fields where the pay is lower than those men enter. More women\u2014roughly three times the number of men\u2014were employed in the health care and social assistance field where the average annual salary is $45,655, according to T. Rowe Price\u2019s study. In contrast, men were twice as likely to work in the information industry, where the average annual salary is $72,640.<\/p>\n

Then, too, at some point in retirement, there\u2019s a high probability that women will be managing their money solo, as I write about in my book, \u201cMoney Confidence: Really Smart Financial Moves for Newly Single Women.\u201d<\/em> <\/a>The T. Rowe Price survey found that within the first 5 to 10 years of retirement, one-third of women (33%) were either widowed or divorced, compared with 17% of men. After 11 years of retirement, the number of widowed or divorced women increased to 45% while the number of men who were widowed or divorced barely changed (18%).<\/p>\n

\u201cMost women cannot afford to make mistakes as retirement is still a rough road and life happens,\u201d Hounsell says. \u201cWomen step up for family and friends even when they cannot afford it. They need to get better prepared for their future \u2014 know the basics, start earlier and take advantage of everything that they can find to help them financially as part of their life plan.\u201d<\/p>\n

There is a bright side to all this doom and gloom. \u201cOur research has found a willingness of women of all ages to ask for advice,\u201d Ward says. \u201c They want guidance and are seeking education. That\u2019s a good thing.\u201d<\/p>\n

I soundly agree. We do our homework. We ask for help. We\u2019re very thoughtful when we\u2019re making big decisions. \u201cWomen, in general, look to achieve a goal, not just hard-core performance numbers,\u201d Ward says. That perspective \u201c lends itself to having a more long-term view, so women tend to not have as emotional a response to market volatility.\u201d<\/p>\n

I asked Ward to share a few tips for women to help ramp up their retirement savings.<\/p>\n

Get started.<\/strong>\u00a0If you\u2019re worried about knowing all the details and making the perfect investment choices, consider investing in a target-date mutual fund, she suggests. With a target-date fund, you select the year you\u2019d like to retire and buy a mutual fund with that year in its name (like Target 2060). The fund manager then splits up investor\u2019s cash among stocks and bonds, shifting that distribution to a more conservative mix as the target date nears.<\/p>\n

Do a budget.<\/strong>\u00a0\u201cBudgeting provides a framework to help you understand where your money is going,\u201d Ward says. \u201cIt helps you to incorporate your savings goals. If you don\u2019t know how you\u2019re spending your money, there\u2019s never any left over to save.\u201d<\/p>\n

Make things as automatic as you can.<\/strong>\u00a0Auto escalation is a great way to stay on that track, advises Ward. Automatic escalation means your employer bumps up the percentage of your pay going into the retirement plan each year, so you can start at, say, 6% and gradually build the amount you sock away pretax.<\/p>\n

If you don\u2019t have a workplace retirement plan, consider a Traditional or Roth IRA, and set an amount to automate regular deposits from your paychecks. I\u2019ve worked for myself for nearly 20 years, and found that when it comes to building up savings accounts, this method still works.<\/p>\n

By<\/strong><\/p>\n

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KERRY HANNON<\/b><\/h3>\n
MARKETWATCH COLUMNIST<\/a><\/strong><\/div>\n
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Kerry Hannon<\/a> is the author of \u201cNever Too Old to Get Rich: The Entrepreneur\u2019s Guide to Starting a Business Mid-Life<\/a>.\u201d She has covered personal finance, retirement and careers for the New York Times, Forbes, Money, U.S. News & World Report and USA Today, among other publications.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n\n\n

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Kerry Hannon, photo by Photopia, Elizabeth Dranitzke<\/figcaption><\/figure>\n\n\n\n

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