In the noise and confusion that surrounded our most recent election, one history-making event may not be getting the attention it deserves. More than a quarter of the newly elected 117th Congress are women – more than ever before. Exactly 100 years after American women won the right to vote, Democrats and Republicans sent a record number of women to represent them in Washington. That is something that is truly worth celebrating.
As we celebrate the many accomplishments of American women and the great strides in equality that have been made, we also need to realize that there is still much work to be done. One area of concern is the challenges women face when trying to achieve financial security in retirement.
When it comes to retirement planning, women have greater challenges to overcome.
Consider these facts:1
- The majority of women have low retirement confidence. Only 12% of women are “very confident” that they will be able to retire in comfort, without lifestyle changes.
- When it comes to retirement planning, only 15% of women have a written retirement strategy, and 42% have an unwritten strategy.
- Women report dramatically lower total household retirement savings: $23,000 among women compared with $76,000 among men (estimated median).
- 32% of women expect Social Security to be their primary source of retirement income.
Disparities in lifetime earnings mean that many women have fewer opportunities to save and smaller cash reserves, and receive reduced Social Security benefits when they retire – all of which can affect their financial security. Add to that the fact that generally women live longer than men. That means that in addition to challenges in funding a retirement, women also need to be prepared for a longer retirement.
Now for some good news! Starting your retirement planning today can make a huge difference in your financial future.
Invest in yourself.
One of the best ways to take control of your financial future is to take full advantage of your employer’s retirement savings plan. The first step is to find out how much your employer will match and strive to save at least enough to earn the full match. If you don’t, you’re missing out on what is essentially free money – a benefit offered by your employer.
Once you begin earning any matching contributions, you should revise your savings goals to try to save even more. You’ll find that it is easier to save when the money goes directly into your savings plan before you have a chance to spend it. And in 2021, you can save up to $19,500 in a tax-advantaged retirement account (and if you’re 50 or older, you can add an additional $6,500).2
Determine when you should begin claiming Social Security.
For most women, Social Security is a significant part of their retirement income, and the right Social Security claiming strategy can make a huge difference. Just because you can start receiving Social Security benefits at age 62 doesn’t necessarily mean you should. In fact, if you continue working, you may have your benefit reduced. So, if you plan to keep working, you may want to wait until your Full Retirement Age. After that, your earnings will no longer reduce whatever benefits you’re entitled to. Also keep in mind that the longer you wait to retire, the more your eventual benefit will increase – all the way up to age 70.
As important as retirement planning is, it can also involve making some complicated decisions. Getting advice from a professional can help you make the right decisions today and help you have a better sense of your financial future. Talk with an advisor and take the first step in creating a retirement strategy that works for you.
1Collinson, C., Rowey, P., & Cho, H. (2019, November). 19 Facts About Women’s Retirement Outlook: Select Findings from the 19th Annual Transamerica Retirement Survey of American Workers. Transamerica Center for Retirement Studies. Retrieved February 16, 2021, from https://www.transamericacenter.org/docs/default-source/women-and-retirement/tcrs2019_sr_women_and_retirement_research_report.pdf
2 IRS. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits.
Retrieved February 16, 2021, from https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits