How to make up the gender retirement savings gap

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Men make higher salaries than women on average. Women often take time off to start a family, and then work part-time when they do return to work, so that they receive lower wages and fewer benefits than their husbands. Yet women live longer on average, so their retirement savings have to last longer and their retirement expenses are higher.

The result is that there is a retirement preparedness gap between men and women. A Vanguard study found that women are more likely to participate in employer savings plans and save at higher rates. But because of their lower earnings, men have about 50% more retirement savings than women. Here are some ways that women can make up this gap.

While men face a $212,000 difference between their actual retirement savings and their needed savings, women are looking at a $268,000 shortfall. The 2015 Gender Gap in Financial Wellness found that the median 45 year old woman needs to make $1.26 for every $1 the median man makes in order to replace 70% of her income in retirement. Here are some suggestions for putting away as much possible.

1. Save as much as you can. If you’ve taken time out to raise a family and are now back at work, take advantage of employer-sponsored retirement plans like 401(k)s and 403(b)s and contribute as much as you can, up to the maximum allowed. Start with a 1% contribution if needed and work up steadily to 15% or higher. Sign up for automatic withdrawals if possible – the Vanguard report found that these increase savings rates for women. Also keep copies of the plan description and documents so that you know what your benefits are. This can be useful if you retire early, change jobs, or there is a discrepancy between your records and what the plan shows.

If you aren’t working, open a personal retirement account and contribute the maximum to it. A Roth IRA in particular allows your money to grow tax-free, with no taxes incurred when distributions are taken and no minimum required distributions.

Also take advantage of catch-up provisions if you’re 50 or over to raise your savings even more.

2. Minimize or pay off debt as much as possible. Carrying debt into retirement, especially consumer debt, can eat into your retirement savings. By paying down high-interest debt you can free up more cash to put into savings accounts.

3. Create a budget and financial plan. Making a budget brings your savings and spending into focus. It enables you to know exactly how much you have saved and potential ways to increase your savings. It also allows you to look at possible ways you can rein in spending to save more. Consider working with a trusted financial advisor, or keep up with your education about financial and investment topics so you know what investments are best for your situation.

4. Look at other savings vehicles. Healthcare is one of the largest expenses for many retirees. A health savings account can help you prepare for this cost. Contributions to a HSA grow tax-deferred and can be withdrawn tax-free for qualified medical expenses.

5. Become familiar with your Social Security retirement benefits. Social Security makes up a significant portion of retirement income for a majority of retirees. Check your records so that you know what benefits you are entitled to, and at what age you should claim. Also be certain of the rules regarding spousal benefits and divorcee benefits if those are applicable – in some cases this can result in higher benefits.

The Women’s Institute For A Secure Retirement website provides resources to help women achieve financial security.

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