A study states that the average woman works for 12 years fewer than the average man, makes $300,000 less than the average man in a lifetime and lives six years longer than the average man. All combined, it means that women have to plan for a longer retirement with less money.
Why women need focus on retirement planning more than men?
According to the Women’s Institute for a Secure Retirement (WISER), in Washington, D.C.:
1. Three out of four working women earn less than $40,000 per year.
2. Half of all women work in jobs without pensions.
3. Women's earnings average $.77 for every $1 earned by men.
And, it gets worse.
Another study conducted by the Transamerica Center for Retirement Studies shockingly revealed that American women are not at all prepared for retirement. They are not saving enough to ensure a comfortable stress-free after work life.
Now that we’ve got your attention, here are a few handy hints for you to stay in control even at the fag end of your life:
1. Start Saving Early
It is very important to start saving early. If you haven’t started yet, start now. If the company you work in offers a retirement plan, take advantage of it. The Employee Benefit Research Institute (EBRI) study showed that 52 percent of workers over the age of 55 currently have less than $50,000 in retirement savings. For workers between the ages of 25 and 35, the figure was a whopping 88 percent.
2. Educate Yourself
80 percent of the women and 67 percent of the men interviewed in a study by ‘Transamerica Center for Retirement Studies’ said they didn't know enough to feel comfortable about retirement planning. If you get the same feeling, don’t be lazy. Educate yourself by various simple measures like reading up on retirement tips, reviewing the retirement and investing guides provided by your employer-sponsored plan and so on.
Understanding these retirement plans may also provide benefits to your spouse, so make sure you read and understand any waiver or consent forms that require your signature as part of your spouse's retirement plan distributions.
3. Diversify Your Retirement Savings
Putting all your eggs in one basket, is a risky business. Diversification of funds is most critical in retirement planning. You don’t want your IRAs and your TSP invested in high-risk funds. Though they generate higher income, if these funds do a U-turn on you, you'll be left a pauper.
The solution is to invest some of your assets in stocks, some in bonds, and some in cash savings account. Try to increase your contributions to your retirement plan progressively as you move closer to retirement. This will allow your plan to grow over a period of time.
4. Thou Shall Not Touch Thy Savings
Temporary pleasures such as vacations home improvement etc might tempt you to pluck your budding savings. No matter how much pleasure you derive from that money now, it will cost you dearly. Withdrawing money from your IRA means you’ll pay income tax and also 10% penalty if you are under the age of 59½. Taking money out of your retirement savings, also decreases the amount of your investment that's allowed to grow tax-deferred. So it is in your best interest to leave that money untouched till maturity of the scheme.
5. Postpone Your Retirement
If, after various calculations and efforts, you still find yourself not where you expected, and you think that you might have to compromise on your lifestyle after retirement, then revise your goals, or better , work longer. A few extra years on the job, will help you generate more savings.
With these simple retirement tips, you should experience a comfortable retirement without worry.
This story was originally published on 2009-08-05.