How do you imagine your retirement years going? For many women, the dream does not align with reality.
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recent study revealed that women are 80% more likely to be impoverished in retirement than men. Once a woman turns 75 years of age, that percentage increases to 300%.
That’s scary. And sad.
How does this happen? How can the retirement of women differ so drastically than those of men?
Let’s consider six reasons why women struggle in retirement:
- Increased life expectancy. Women tend to live longer than men. Living long is a good thing. But this means that they have a higher risk of running out of money.
- Lower income. Women tend to make less than men during their career. This means that they have less money to save for retirement.
- Risk-adverse investments. Women are more likely to place their money in less risky investments. These less risky portfolios do not generate the same return as the more risky portfolios, leaving less for retirement.
- Breaks in work affect savings. Women are more likely to have breaks in their career, often to have and raise children. This is a certainly a good thing. But these breaks often occur early in the career, leaving women with less money and time to take advantage of compounding. Understanding this is key so that you can plan accordingly.
- Breaks in work affect Social Security. These breaks can also reduce Social Security benefits. To determine an individual’s benefits, Social Security takes a portion of the average earnings over 35 years. If there are not 35 years of work, “zero years” are used in the calculation, lessening the benefit. Again, some breaks in work may be the very best decision. But that decision must take long term factors into account as you plan for your whole life.
- Loss of husband. Because women tend to live longer, they are more likely to experience the death of their spouse than men. If the death of their spouse occurs prior to retirement, there is a decreased ability to save, assuming the husband earns income. If the death occurs during retirement, Social Security benefits will be less than the combined benefits living couple receive.
So what are women to do? Awareness of the risk is the first step. Next, start preparing for retirement. Make 15% of your gross (before taxes) income your goal. And take advantage of any company match.
If you are married, talk to your husband about retirement. Remember, there is a possibility that the amount saved will ultimately be more important to you than him. Every opportunity you have to save for retirement now can pay off in the end, so keep the big picture in view.
Written by Art Rainer, member of the Summit Stewardship and Generosity Ministry Leadership Team.Get resources like this one directly into your inbox by signing up for the Stewardship Ministry Digest.The Summit provides free financial coaching to help you gain control of your personal finances according to God’s plan.Sign up here.