Almost half of U.S. adult females say they may run out of retirement cash early, according to a new study from Merrill Lynch.
In addition, when a woman reaches retirement age, “she may have earned a cumulative $1,055,000 less than her male counterparts when accounting for the lifelong pay gap alongside common workforce interruptions,” the Merrill Lynch report states.
There are several “big picture” reasons why women do not have enough money saved for retirement, says Maggie Johndrow, a wealth manager at Farmington River Financial Group, in Farmington, Conn.
“There’s not only the wage gap but the fact that women also tend to leave the workforce for a period of time to take care of children or aging parents,” says Johndrow. “That leaves women with less time and money to add to things like pensions, Social Security, and employer retirement savings plans.”
How can women play catch up and stash enough cash for their Golden Years? (Wondering how much you need to save for retirement? Read this.)
Take these three key actionable retirement planning steps to generate some much-needed retirement savings momentum:
1. Start Team-Building
First and foremost, women should build a financial team led by a financial advisor that will give them the confidence to get on track to retire and attain financial freedom, Johndrow notes. “An advisor can help you get on track to successfully achieve retirement,” she explains.
“This may be a combination of changing your investments, adding more to your investment accounts, and choosing life insurance products such as long-term care insurance. An advisor can also assist with picking investments that provide a reasonable return for your personal risk tolerance and investments that will get you on track to retire.”
2. Max Out Contributions to Your Retirement Accounts
“The maximum contribution under 50 years old to a 401K is $18,500 for 2018 and $5,500 in an IRA in 2018,” Johndrow states. “After 50 years old, you’re allowed a $6,000 additional catch up in your 401K and a $1,000 additional catch up in your IRA.”
3. Budget so You Won’t Outlive Your Money
“Women need to look at every single dollar being spent and make the difficult choices to spend money on things more important than not outliving their money,” advises Ilene Davis, a money manager in Cocoa, FL. “For example, if you’re single, find some other women who want to improve their finances and share a place to live, just like the Golden Girls.”
To know how much you can realistically afford to spend, or how much you need in wealth to afford your desired lifestyle, check out the financial website ChoosingWealth.com, Davis says. “There’s a calculator to make doing the math quick and easy,” she notes. (Need helping creating a budget? Read this.)
The evidence is all too real that women have an uphill climb to a comfortable retirement compared to men. Start leveling that playing field by addressing the key issues listed above, and supercharge your retirement savings plan in the process.