Eeveryone should be saving for retirement. But if you’re female, you should be saving more than your male peers.
This may seem unfair, especially since women already have a harder time making ends meet due to the gender pay gap. But unfortunately, it is necessary. And there are three big reasons why women need to go the extra mile when it comes to investing for their later years.
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1. Women live longer
In 2019, the average life expectancy at birth was 81.2 years for a woman and 76.3 years for a man. If you are a woman who lives for the average length of time, you will need to fund an additional 4.9 years of retirement. You’ll need a bigger nest egg to cover those extra years and make sure your account doesn’t run out while you’re still relying on it.
2. Their social security benefits tend to be smaller
Savings and social security are the two main sources of income for most retirees. Unfortunately, social security benefits also tend to be lower for women, both because of the gender pay gap and because women are more likely to work part-time due to family obligations.
The Social Security Administration reported that the average annual benefit for women 65 and over was $ 13,505, while the average benefit for men was much higher at $ 17,374. If the average woman wanted to have the same standard of living as her male counterpart, she would need to save almost an additional $ 100,000 just to make up for the $ 3,869. social security shortfall (assuming she follows the 4% rule for withdrawals from a retirement account).
3. They are more likely to become widowed
Older women are much more likely to be widowed than men, which makes sense as they live longer. Women are also more likely to marry older men than men are to marry older women – making widowhood even more so. Following likely. And, when they are widowed, women are less likely than men to remarry. This means that more women find themselves solely responsible for supporting themselves during part of their retirement.
While Social Security survivor benefits allow widows to keep the larger of the two benefits either partner was receiving, it could still mean a substantial loss of household income after the death of a partner. joint. This can be particularly damaging for women whose income was equal to that of their partner. If each spouse received $ 1,500 in Social Security benefits, the death of a partner would completely cut Social Security income in half. Expenses, on the other hand, are not necessarily halved in the event of death. In this case, the widow would therefore have to turn to savings to cover the costs that her husband’s benefits had already paid.
Since women are more likely to live a number of years relying only on their own income and savings without the contributions of a spouse, it is imperative that they have a larger nest egg to support them during this time. period.
Set your retirement savings goals and start saving early
With none of these factors likely to change anytime soon, women need to make sure they are doing what they can to protect themselves from financial hardship in retirement. This means starting to save as early as possible and being aggressive in the amount invested.
If you’re female and haven’t already, set a retirement savings goal and start making automated contributions to a tax-efficient organization. pension plan to make sure you hit your target. This is actually good advice for both men and women. But as you can see, this is especially important for women, as their retirement is likely to be very different from that of their male counterparts.
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