Women and Retirement Savings: Why You’re Not Saving Enough

Listen up, ladies. Listen really hard, because your future is on the line.

As a group, you’re not saving enough for retirement.

According to a recent publication by TIAA (which happens to be the firm my employer uses for retirement purposes), women should be saving 18 percent of their paychecks, while men have the luxury of only needing to save 10 percent (the lucky ducks).

If you’re a woman, can you confidently say that you’re saving a total of 18 percent of your paycheck and putting that money to work for you, toward retirement? Nope, I know, an impossible feat, right?

The reasons for the need to save more are pretty intuitive, I think. In fact, here’s the exhaustive laundry list of reasons why women need to save more than their brawny counterparts:

1. Women don’t make as much money as men.

2. Women are less at ease with investing risk.

3. Women take more time out of the workforce over the course of their lives.

4. Women live longer than men.

Let’s pick these apart, line by line.

Women don’t make as much money as men

It’s old, it’s tired, it’s a continual sad story, and I hate to even bring it up because of the political baggage that ties in with this one: Women don’t make as much money as men. I truly have the least amount of feminist fizzle in my veins compared to any woman on the planet, but according to the U.S. Census Bureau, women still only earn 78 cents on the dollar relative to men. Apparently, professional women earned $996 per week in 2015, compared to professional men who earned $1,383 per week.

Reason #1 that women need to save more. Check, check.

Women are less at ease with investing risk

The technical term is “risk-averse,” and as a woman, I think I can understand that, despite the fact that I like stocks! Women like to hold onto cash reserves and tend to be more “afraid” to “gamble” their money.

Okay, I could totally be overgeneralizing here, and feel free to call me out: Men, being men, tend to be more open to risk–just because that’s the nature of men?

According to the TIAA report I read, women tend to hold on to safer assets such as bonds and money market funds, whereas men favor stocks, mutual funds, and ETFs.

If we took a survey of young professionals, I wonder what risk comfort yield would be between both genders? Because if you’re a 24-year-old woman, you should be pressing the gas pedal full speed ahead, putting your retirement in stock holdings because you’re young! No question about it. But is the younger generation more comfortable with risk, baby boomers, not so much? I’m sure there’s lots of material about this if I took the time to research it.

Anyway, it’s time for women to stop worrying about losing money in the market and begin to start worrying about running out of money. What will you do if you’re 95 and out of money in retirement? Golly, that gives me shivers.

Women take more time out of the workforce

God bless our mamas. Truly, where would we be without them?

My own mom graduated from nursing school in 1978, got married in 1980 and worked until I was born in 1982. She didn’t go back to work full time until 1994, once my sister went off to kindergarten. She missed out on 12 years in the workforce, which means that she has spent a total of 27 years working, compared to my dad’s 40 years.

An excellent and totally typical example, right? According to the Pew Research Center, the number of women leaving the workforce to care for children is on the rise. And women aren’t only caring for children–they’re also caring for their elderly parents, as well.

These examples define the reasons why women need to save more of their paychecks for retirement.

Women live longer than men

Women have to save more because we’ll likely live longer. Once women reach age 65, they outlive men by 2.5 years with life expectancies of 85.5 and 83, respectively.

And unfortunately, as we all know, additional health care expenses also crop up with age, also adding urgency for women and retirement savings to increase.

Where to start (if you haven’t already)

I think one of the biggest hang-ups is not knowing where to invest and how to start. There are literally thousands (millions?) of options, and I think that’s what makes this investment stuff so overwhelming, even for women who know the differences between a traditional IRA and Roth IRA. But the biggest thing is just to get started on something.

Your HR office will be able to connect you with a representative who will be an expert on women and retirement.

You can select the right funds for you and will be able to ask you questions about your specific retirement timeline and objectives, etc.

Here’s another major hang-up: What if your employer doesn’t offer a plan? You’re going to need to research your own IRA options. Again, millions of options are open to you.

A target retirement fund is a great option if you’re not interested in building a fancy-schmancy self-directed plan, and you can always get a financial adviser who will have lots of fund knowledge at his or her disposal, and again, be an expert on women and retirement savings.

How much should I invest?

As much as you possibly can. Twenty percent would be above and beyond–absolutely magnificent.

I know, any more than three percent seems impossible these days (how will I pay my mortgage?)–but remember, every little bit helps you for your future.

Annual Maximums

Luckily, the annual maximum contribution levels for retirement savings are pretty high for women who are working. The IRS has announced that the contribution limits for 401(k) contributors will be $18,500 in 2018. However, if you’re 50 and older, you can take advantage of the catch-up provision and plunk in $6,500 for 2018.

For IRAs in 2018, you can make annual contributions of $5,500, and the catch-up contribution is $1,000.

The Roth IRA contribution limit is the same as that of IRAs, at $5,500, but there are some income limitations with the Roth, as you may already know. Your income has to be between $120,000 and $135,000. For married filers, that income threshold starts at $189,000 and ends at $199,000.

Make your retirement contributions automatic

This is a MUST-DO: Make your contributions automatic. Have money sent directly from your checking account to your IRA every month, so you don’t have to think about it at all and (hopefully) won’t even miss the money. If at all possible, aim to max out your plan.