When it comes to saving for retirement, women face a triple whammy. For starters, women, on average, live three years longer than men. In fact, most women can expect to be retired for 22 years, versus 19 years for men, according to this report from Hewitt Associates.
Once they’re retired, women tend to face higher healthcare costs. Consider these figures: the average 65-year old man in 2009 will need between $134,000 and $378,000 in order to be 90 percent sure he can cover all his health insurance and medical costs in retirement. The same figures for women are $164,000 to $450,000, the Employee Benefits Research Institute reports.
That’s not all. Women tend to earn less than men. Their average salary comes in at around $57,000, versus $84,000 for men, again according to the Hewitt report. That’s because women are more likely to take time off to start families just as their male counterparts are rising up the corporate ladder. Women’s lower average salaries hurt their ability save for retirement, since the calculations behind many corporate retirement plans, as well as Social Security, are based on earnings levels.
The upshot? Most women start retirement with fewer dollars saved, and have to make them go even further. In fact, women’s median income in retirement is just over half – 58 percent – of men’s income, reports The Hartford and the MIT AgeLab. No wonder nearly two-thirds of women are concerned that they’ll outlive their retirement savings!
While these figures are sobering, to say the least, they’re not a reason to throw up your hands and do nothing. Instead, they should be a call to action. A couple steps you can take:
- Get comfortable with saving and investing. If you’ve put off saving for retirement because you feel you don’t know enough, now’s the time to start learning. If you’re married, you don’t want to leave this all to your spouse; having a Y chromosome doesn’t mean one is more gifted at saving and investing. If you’re single, you really need to take this on while you still have time to prepare.
Any of the many website (including this blog!) and publications on the topic, such as Money or Kiplinger’s Personal Finance are great resources. One book that can help is “Saving for Retirement without Living Like a Pauper or Winning the Lottery” by Gail MarksJarvis.
- If you work outside the home and your employer offers a retirement plan, use it! Start now, even if it’s just $25 $50 a month. Then, increase your contribution on a regular basis. If you get a raise, for instance, bump up your contribution. If you get a bonus or come into a chunk of cash, stash some of it in your retirement account. You also want to understand how the plan works. For example, if you have to work for five years before you’re vested (that means you are eligible for benefits from the company pension plan), you want to think long and hard about quitting after four years and seven months on the job.
- Pay yourself first. You’re not doing your kids any favors by showering them with the latest toys and accessories, if it means you can’t save for your own retirement. That’s true for paying for college, as well. Your kids can look into financial aide, take out student loans (prudently), or work and earn money for school. You can’t take out a loan to fund your retirement. What’s more, no matter how much your kids love you, they probably don’t want to be forced to take you in if you can’t afford your own place in retirement.
- Keep tabs on your Social Security earnings. If you currently work, or have worked, you’ve built up Social Security credits. You also may have credits if your spouse works. For many women, Social Security is a major chunk of their retirement income. To check this out, head to the Social Security website: http://www.socialsecurity.gov/
- Work longer. If you can stay in the workforce a few years longer than you may have planned, you benefit if two ways, First, you’re earning more income, which means you can save more. On top of that, while you’re earning an income, you should be able to postpone dipping into your retirement account.
While preparing for retirement may not be the most enjoyable task on your To-Do list, it is one of the most important. What’s more, there’s no reason to be intimidated by it. Start with small steps and keep at it. You’ll have a much better chance of having a retirement you can enjoy, versus one spent worrying about money.
Thanks for your comment. I hadn’t heard that women’s healthcare costs might be due to the business of healthcare. The explanations I’ve seen have centered on their generally longer lives; even if women tend to be healthier, they would use more medical care just because they’re hanging around longer. However, you’ve got my curiousity up, and I think this is worth looking into!
This is a really interesting post -your observation about their smaller salaries suggests that women face a quadruple whammy (maybe even worse than that). I also wonder about the disparity in healthcare costs – I recall some research that attributed the higher costs for women to an underlying business dynamic rather than actual medical needs. Since women live longer, and would seem to be in general healthier than men (at least in the late stages), why should they have to pay more?