Key takeaways
- Women need to save differently for retirement.
- Factors such as longevity, the pay gap, the investing gap, and caregiving can lead to less in retirement savings.
What's different for women
1. The pay gap
The fact that women are often paid less than men in comparable positions might not be a surprise. But there can be other pay gaps too, specifically for women of color and mothers. And when women are earning less in salary, it snowballs when it comes to retirement—since most people save a percentage of their income each paycheck for retirement. If you're making less, then the total amount you're putting into your retirement is lower. Not only is the contribution amount potentially lower, but over time, there is a likely impact to the potential for compounding growth.
What to consider:
If possible, save more for retirement; even 1%–2% more each month can make a difference. Should you be able to max out your 401(k)/403(b) contributions, you can continue to save each year (up to the IRS max) in a separate retirement account such as traditional IRA, Roth IRA, or rollover IRA. However, remember that it's not the percentage that matters as much as making sure you have enough for retirement, so talk to a financial professional about having a plan and tracking toward it.
2. The investing gap
Research shows that women are more likely to keep extra money (meaning anything outside of retirement or an emergency fund) in cash instead of investing. More than half of women have $20,000 or more sitting in cash; more than one-third of women have $50,000 or more in cash.1 Not only is cash missing out on potential growth, but it isn't even keeping up with inflation.
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