Healthy People
3 Helpful Tips for Women to Overcome the Retirement Savings Gap
3 Helpful Tips for Women to Overcome the Retirement Savings Gap
The average 401(k) balance for women is nearly $42,000 less than their male counterparts.
According to a study from T. Rowe Price on retirement savings and spending, the median income for women is decreasing, and the gap between median balances of 401(k) plans for men and women is growing. A Nationwide Retirement Institute survey uncovered that due to inflation and overall cost of living increases, 62% of women now expect to retire later than originally planned or not at all, while only 47% of men planned to delay their retirement. These are extremely worrying trends in the disparity between men and women and their savings outcomes. The main factors contributing to this are the wage gap and the need for more savings. It is important to arm women with the skills needed to feel comfortable making the correct decisions when it comes to short and long-term financial decisions.
Wage/Income Gap
The first issue is that women are earning less money meaning they are also saving less. With the compounding nature of savings, the more money you put away, the more money you will have when you withdraw those funds. The more money that can compound over time will give you more at retirement or whenever you need to use those savings in the future. The 20% wage gap is a steep hill to climb. Therefore, better savings habits can make a huge difference.
Women Need More Savings
Women, on average, live longer than men. Because women live longer, they must spread their savings over a larger time window. Many women age 80 and older are likely to experience other income challenges in retirement because of increases in healthcare costs and the unfortunate prevalence of widowhood. These trends cause women to be more self-reliant because they spend more time in later retirement as the sole provider of their household. That is why having good savings practices today can help prepare you for your financial future when it may get more difficult.
Combat the Savings Gap with these Helpful Tips
Tip #1: Increase Contribution (Specifically to Meet Employer Match)
If your employer offers you a match in your 401(k) or similar retirement plan, take it! Make sure you’re not leaving any money on the table. The best way to ensure you’re getting the full match is to spread out your retirement plan contributions evenly throughout the year. Some retirement plans have rules about matching on a per-paycheck basis, and you don’t want to miss out on the free money.
Gradually increasing your contribution rate during annual raises or through automatic features like auto-increase are great ways to increase your savings while having little impact on your paychecks. New Year’s Resolutions are a great time to make small increases too – just 1% at a time can make a big difference over time, and you’ll be more likely to stick with it!
— Jennifer Pearson, Vice President, OneDigital Retirement + Wealth
Tip #2: Start an Itemized Monthly Budget
When it comes to spending, women make the majority of all consumer purchases in the U.S. And, when you consider we also feel more financial pressure than men, it’s especially important for us to take control of our money and spending. A budget not only provides a plan for staying on track—but it also means we feel less stress because we have better financial footing and know what to expect.
— Mary Caballero, Managing Partner, OneDigital Retirement + Wealth
Tip #3: Set Aside Your Tax Refund
We all have a limited amount of money to save or spend. If you have credit card debt or student loans and you’re wondering whether to save or pay down the balance, consider the interest rate in your decision. If you’re paying more than 6% interest on the debt, try to eliminate it more quickly so you can avoid paying those fees. On the other hand, if it’s low or no interest, it might be better to balance paying down the debt with saving for the future.
— Katherine Golladay, Investment Advisor, OneDigital Retirement + Wealth
Start Saving Today!
It’s crucial in the world of savings to be consistent and let your savings grow with time. With these helpful tips, you too can work toward building better savings in retirement for you and your family. You can buck the trend plaguing many by using the resources you have to increase your financial literacy, which can have a significant impact. Savings don’t just help you in the future. They can help give you peace of mind today that you are prepared and will be financially prepared for anything that may come your way.
For more savings tips, read: 3 Helpful Tips to Start Building Emergency Savings.
Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.