Womens Retirement Mistakes

64% of Women Are Making This Huge Retirement Mistake

Updated on Oct 15 2019

Statistics show that the majority of women in America are not adequately preparing for retirement. Even with the best intentions and aspirations for financial preparation, life happens and can impact finances negatively. Learn what retirement mistakes women are making and how to avoid these financial snafus.

Many women are forced into early retirement for a myriad of reasons, including layoffs, illnesses and caregiving. You would think American women would be taking steps to prepare for the possibility of an emergency, but the reality is that the majority of women are not thinking about the possibility. In fact, according to Transamerica, a provider of insurance and investment services, a good 64 percent of women don’t have a backup plan in the event of being forced to retire early. Add to that, female workers aren’t saving very well to begin with, adding to the potential for long-term disaster.

Women Need to Prepare Better for Retirement

Though retiring earlier than planned can spell trouble regardless of gender, it poses an even greater challenge for women than it does for men. This is not only because women tend to live longer, but also because they are more likely to have to leave their jobs to care for aging loved ones. For each year women are forced to leave their careers sooner than planned, they risk falling short on income during retirement by an additional year.

Early retirement aside, women are not doing a great job of saving for the future. The median retirement savings balance among female workers is only $34,000, according to Transamerica, and while that’s not such a dreadful sum for someone in her 20s, it’s nowhere close to where a worker in her 40s, 50s, or 60s should be. An investment time horizon is something that needs to be considered sooner rather than later, and ideally with an expert financial advisor.

How to Protect Yourself from Financial Unknowns

As a financial best practice, you should aim for an early retirement as the future is unknown. Being proactive about savings and retirement planning will help you not only be prepared for an emergency, but will also help give you peace of mind knowing your retirement is on track. Here are a few things to think about:

1. Boost your Savings Rate

Review your financial big-picture, including your spending and assets, and set goals. If you can cut expenses from your budget, like a daily coffee or weekly restaurant splurge, you can add an extra $100 to $200 to your monthly savings. Investing that money wisely is even better. Think about it: Boosting your savings rate by $200 a month over a 20-year period will leave you nearly $100,000 richer, assuming you invest that money at an average annual 7 percent return.

2. Invest in Retirement Accounts, like IRA and 401(k)

A great place to invest your money is in your retirement investment accounts. Whether it’s a performance bonus, tax refund or holiday gifts, this money can help improve your nest egg substantially. Think about it: If you were to deposit an extra $3,000 into your 401(k) or IRA just once and leave that money to grow at an average annual 7 percent return, that would turn into $12,000 over 20 years with compound interest.

3. Take Advantage of Social Security

Strategizing Social Security to achieve maximum benefit is smart. You’re allowed to access your benefits as early as age 62, but working longer improves the benefit. Your payouts are based on your highest years of earning, so keep in mind that the benefit will be calculated based on those years. If you are forced to leave work early, there are some hidden Social Security benefits, such as the Dependent or Spousal Social Security benefit, to keep in mind. Learn more about Social Security benefits and estimate your benefit by using the Social Security Administration’s retirement estimator.

4. Consider a Side-Job

Even if you retire early, taking a second, part-time job is a great way to earn extra spending money while keeping active in the community. Many seniors find retirement jobs enriching and fun while greatly benefiting their pocketbook. A side-business that includes a hobby or even working at the local department store or school can mean thousands of extra dollars in your bank account.

5. Research Your Healthcare Options

If you’re forced to retire early, make sure you research healthcare options so you’re not scrambling for coverage. Keep in mind that Medicare eligibility doesn’t begin until age 65, so if you’re laid off from your job at age 64, you’ll need to buy a health plan on your own or pay for coverage under COBRA.

Get a Financial Backup Plan

No one can predict their future, so you need to plan ahead to protect yourself financially. It’s important to not hold off on saving money today with the assumption that you’ll catch up in your 60s as, unfortunately, you may not get that option. Instead, do your best to fund your nest egg, explore various part-time, or even full-time, work options outside of your current job, and read up on health plans and Social Security. The simple act of arming yourself with knowledge could go a long way when your career comes to a halt earlier than planned.

Here are some other articles to read to get more tips on saving for retirement:

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