3 steps that all women should take – the crazy Motley

The gender gap does not stop at wages. It extends until retirement. According to the Transamerica Retirement Research Center, while women are more involved in the labor market than ever before, only 12% of them are "very confident" that they can retire comfortably. But 24% of men, double the number of women, are very confident that they can do it.

Unfortunately, women have reasons to feel less confident than men about the security of their retirement. The median retirement savings for women is currently $ 42,000; for men, it's three times more: $ 123,000. While 20% of women report having a retirement benefit of $ 250,000, many more men (38%) have reduced this amount. In addition, there are more than twice as many women who have saved relatively little for retirement: 21% of them have less than $ 10,000 in reserve, while only 12% of men say they have this little saving.

In part, these disparities in retirement savings reflect the persistent gap between men's and women's wages. On average, women earn $ 0.81 for every dollar earned by a man. Some demographic data, such as black women and Hispanic women, earn even less, earning only $ 0.50 for every dollar earned by a man, half!

But there are also other factors at play, and for women to be able to enjoy their golden age, it will be easier to understand why they are so far behind men when it comes to sex. saving.

First, women are more likely than men to withdraw from the labor market or work part-time to raise their families. During these times, they may not win at all or earn less than they are used to.

Second, women live longer than men on average, according to the US Center for Disease Control. The average life expectancy is currently 81.3 years for women and 76.5 years only for men. Thus, not only do women earn less than their male counterparts and have limited or no earnings spells that most men do not know, but they also have to stretch their retirement savings over several years.

And of course, there is the pink tax, which means that women often pay more than men for the same products, and the long list of expenses that women spend in their lifetime for things that men rarely buy. (think of hair coloring, feminine products, cosmetics, etc.). ).

Earning fewer years of work has the secondary consequence of reducing the amount of social security benefits to which women are entitled, with social security based on the worker's 35 highest earning years.

Fortunately, women can begin to reduce the gap between men and women in retirement by ensuring that their own pensions are safe and rewarding. Here are three steps that every woman should take to retire.

1. Put more emphasis on saving for retirement

It is not that women do not save for retirement. They think about retirement and expect it, albeit at a slower pace than men; 45% of women expect to finance their retirement with savings, compared to 52% of men.

More and more women are also expecting to rely on sources other than their savings for retirement. Thirty-three percent of women expect social security benefits to be their main source of retirement income, but only 23% of men expect to rely primarily on social security. And 16% of women think that working in retirement will be their main source of income, while 12% of men benefit from this plan.

To start bridging the gender gap in retirement savings, women can change their financial priorities. Almost 70% of women consider debt repayment a major priority. Although debt servicing may be necessary, it may be prudent to take a portion of the monthly amount for the debt and save it for retirement. If you use a retirement savings instrument that invests, your money will be compounded over time and will provide you with tax benefits.

It is also a good idea to consider retirement benefits as an essential element of any benefits program. Only 66% of employed women are offered a retirement plan equivalent to 401 (k) or equivalent through their place of work, while 75% of men are. It is cost-effective to proactively search for companies offering a 401 (k) plan and to question its mechanisms, such as an agreement between employers, when negotiating a job offer.

2. Participate in retirement savings plans

Currently, 73% of women participate in a 401 (k) scheme or an individual retirement account (IRA), compared to 82% of men. Among employees with access to 401 (k) plans, 77% of women contribute, compared to 84% of men. On average, women contribute only 7% of their annual salary and men, 10%.

Before you can increase your contributions, you must first open a retirement savings account. His extremely important to fund your retirement for a number of reasons.

First, social security is very unlikely to cover all of your retirement needs. The average monthly social security benefit is $ 1,461, which is about 40% of a retiree's income before retirement. The remaining 60% must come from other sources, such as savings.

Second, the employer-sponsored 401 (k) can help you actively save more for retirement. Many businesses and employers will match the contributions from your retirement account, usually between 50% and 100% of your own contributions. In other words, if you contribute 6% of your pre-tax income to a 401 (k) and your employer offers a 100% match, they will add the equivalent of an extra 6% of your salary to your 401 (k). , a rare case of free money.

Third, 401 (k) s and IRA allow you to invest in a variety of investment categories, from equities to fixed income investments such as bonds and bank deposit certificates (CDs). Historically, the stock market has returned 7% a year, significantly more than any other type of asset.

Finally, 401 (k) s and IRAs offer potential tax advantages, which may allow you to have more money. Your 401 (k) contributions are deducted before taxes, before your employer withholds money from your paycheck for income tax. In other words, you do not pay tax on the money you save in a 401 (k) until you retire it at retirement.

Contributions to a traditional IRA can be deducted from your income in the year of your creation, up to a limit of $ 6,000 per year ($ 7,000 if you are 50 or older). Roth IRA contributions do not allow tax deduction in the year you make them, but withdrawals from a Roth IRA are not taxed at retirement, while withdrawals from traditional IRAs are taxed at the rate ordinary income in retirement.

In short, all that women can do to set up retirement savings plans, contribute regularly and benefit from their tax benefits will increase their stability and security at retirement.

3. Develop a specific retirement strategy

It is always better to have a firm retirement strategy. Rather than vaguely speculating on retirement, take the time to write what you want to do. Think about what you need to get there, then note the differences between your current position and where you need to be. Developing a strategy for yourself is essential to improving your financial security.

Your plan should never be frozen and you can even revise it every year. Periodically, you have to look at how you are doing, otherwise you run the risk of not knowing if you have saved enough for your timeline.

Many Americans think that $ 500,000 saved in retirement is enough to make them financially secure, but a majority of women (55%) have reached that figure by guessing – only 39% of men guessed it. There are several ways to estimate the total savings you will need. Familiarize yourself with some rules of thumb about retirement.

It takes a lot of time and good policy to start reducing gender disparities. It is high time to eliminate the gap of gender disparity during retirement, and you can start by making sure that you are comfortable during retirement and sure of your ability to get there. arrive.