Understanding the special challenges women may face in planning for retirement can help manage the associated risks.
All investing involves risk, including the possible loss of
principal, and there can be no assurance that any investment strategy will be
*There is no assurance that working with a financial
professional will improve investment results.
If you're self-employed or own a small business, look into
retirement savings options tailored to your needs, including individual 401(k)
plans, Keogh plans, SEP plans, and SIMPLE IRAs and 401(k)s.
**Roth IRAs impose income limits on the ability to make contributions. There are no such limitations on traditional IRA contributions, and they may or may not be tax deductible, depending on your income.
of Labor, Bureau of Labor Statistics, March 22, 2019
Data Brief, Number 355, January 2020
3U.S. Department of Health and Human Services
Administration on Aging, 2018 Profile of Older Americans
Retirement-Planning Tips for Women
Women often face special challenges when planning for
retirement. For example, if they are the primary caregivers in their families,
their careers may be interrupted to care for children or elderly
means they may spend less time in the workforce and
earn less money than men in the same age group. And even
if they remain in the workforce, women still tend to earn less
than men, on average.1 As a result, their
retirement plan balances, Social Security benefits, and pension benefits are
In addition to earning less, women generally live longer than men,
which means having to stretch potentially limited retirement savings and benefits
over many years.
To help yourself or the women in your life manage these financial challenges, consider the following tips.
If you haven't already done so, begin saving now
Start with a realistic assessment of how much you'll
need to save. An online retirement savings goal-setting calculator can help. If the figure is substantial, don't be discouraged — the most
important thing is to begin saving now.
The chart below shows how just $2,000 invested annually at a
6% rate of return might grow over time:
Age you begin saving for retirement:
Amount you could save by age 65:
This is a hypothetical example of mathematical principles,
is used for illustrative purposes only, and does not reflect the performance of
any specific investment. Results assume reinvestment of all
earnings. Fees, expenses, and taxes are not considered and would reduce the
performance shown if they were included. Actual results will vary.
Save as much as you can — you have many options
If you work outside of the home and your employer offers a retirement savings plan, such as a
401(k) or a 403(b), consider enrolling as soon as possible and contribute as
much as you can. These plans make saving easier because your contributions are deducted
directly from your pay, and some employers will even match a portion of your contribution.
If your employer offers a pension plan, find out how many years
you'll need to work for the company before you are "vested in," or own, your
pension benefits. Understanding this information can help you make an informed decision if you think you might need to leave your job at some point to care for family members. Keep in mind, too, that because your pension
benefits will be based on your earnings and years of service, the
longer you stay with one employer, the higher your pension is likely to be.
Most employer-sponsored plans allow you to choose from
several investment options (typically mutual funds). If you have many years to
invest or you're trying to make up for lost time, you may want to consider
growth-oriented investments such as stocks and stock funds. Historically,
stocks have outperformed bonds and short-term instruments over the long term,
although past performance is no guarantee of future results. However, along
with potentially higher returns, stocks carry more risk than less volatile
investments. A good way to get detailed information about a mutual fund
you're considering is to read the fund's prospectus, which can be obtained from
the fund company. It includes information about the fund's objectives,
expenses, risks, and past returns. A financial professional can also help
you evaluate your retirement plan options.*
Save for retirement — no matter what
Even if you're staying at home to care for family, you can
— and should try to — save for retirement. If you're married, file your
income taxes jointly, and otherwise qualify, you may open and contribute to a
traditional or Roth IRA as long as your spouse has enough earned income to
cover the contributions. Both types of IRAs allow you to make contributions of
up to $6,000 in 2020 (unchanged from 2019), or, if less, 100% of taxable
compensation. If you're age 50 or older, you're allowed to contribute even more
— up to $7,000 in 2020 (unchanged from 2019).**
Plan for income in retirement
Do you worry about outliving your retirement income?
Unfortunately, that's a realistic concern. At age 65, women can
expect to live, on average, an additional 20.7 years.2In fact, many women will live into their 90s. This means that women should generally
plan for a retirement that will last at least 20 to 30 years.
Women should also
consider the possibility of spending some of those years alone. According to
recent statistics, 32% of women age 65 and older are widowed, 16% are divorced,
and 34% live alone.3 For married women, the loss of a spouse can
mean a significant decrease in retirement income from Social Security or
So what can you do to help ensure you'll have enough income
to last throughout retirement? Here are some tips:
- Estimate how much income you'll need. Use your current
expenses as a starting point, but note that your expenses may change by the
time you retire.
Work-based retirement plans often provide helpful tools to estimate your income goal. You can also find calculators on the Internet.
- Find out how much you can expect to receive from Social
Security, pension plans, and other sources. What benefits will you receive
should you become widowed or divorced?
- Set a retirement savings goal that you can work toward,
and keep track of your progress.
- Save regularly, save as much as you can, and then look for
ways to save more — dedicate a portion of every raise, bonus, cash gift, or tax
refund to your retirement savings.
- Consider how you can help protect yourself and your family
from potentially substantial long-term care expenses. By planning ahead, you
could help preserve your choices for care and may avoid becoming a burden on
Understand these important "don'ts"
1. Don't avoid the planning process
Perhaps you're so wrapped up in balancing your
responsibilities that you haven't given retirement planning much thought.
That's understandable, but if you don't put retirement
planning at the top of your to-do list, you risk shortchanging yourself later
on. Staying focused on your goal of saving for a comfortable retirement is
difficult, but if you put yourself first, it could pay off in the end.
2. Don't rely on your spouse
Married or not, it's critical for women to take an active
role in planning for retirement. Consider that you may be forced to make important
financial decisions quickly during a period of crisis. Preparing for
retirement — or any financial goal — with your spouse could help ensure that you're both well-informed when the time comes to make the critical choices.
3. Don't prioritize your children's education over your retirement
Many well-intentioned parents put their own retirement
savings on hold while they save for their children's college education. But if
you do so, you're potentially sacrificing your own financial well-being. Your
children have many options when it comes to financing college — loans, grants,
and scholarships, for example — but there's no such thing as a retirement loan.
4. Don't neglect to learn the basics of investing
If you're unfamiliar with common investment terms such as diversification, asset allocation, and compounding, you can broaden your knowledge in as little as a few minutes each day. A simple web search can reveal hundreds of educational articles and videos. And remember, you don't
have to do it by yourself — a financial professional will be happy to work with
you to set retirement goals and help you choose appropriate investments.