- Due to unique career challenges, women will need to invest differently to retire comfortably.
- Retirement saving for women can be difficult due to pay gaps and time out of the workforce.
- Experts Bobbi Rebell Kaufman and Stacey Tisdale offer tips for building and maintaining wealth.
The goal of a successful retirement is to ensure that you will have enough funds to maintain your lifestyle and even enjoy your retirement years. Saving for this goal should start early and be consistent, but for women it can be difficult for many reasons: the gender pay gap, time out of the workforce, being caregivers and even to bear the cost of university expenses for their children.
One of the main reasons why savings are particularly important is that women generally outlive their spouses and studies show that women are 80% more likely than men to live in poverty in retirement.
We spoke with Bobbi Rebell Kaufman and Stacey Tisdale, CEO of Mind Money Media, Inc. to discuss strategies women can use to continue investing and prepare for retirement later.
“It’s critical that women understand what their specific savings and investment challenges will be,” Kaufman told Insider. “As women earn less money over the course of their careers – and some choose to temporarily leave the workforce – it is important to recognize these barriers and make retirement a priority,”
These are sobering facts about women and their financial preparedness, but women can take steps to prepare.
Understanding your debt and its impact on your retirement
Conventional retirement planning wisdom is to work hard, save some of your paycheck, and invest in stocks and real estate. But this formula is not unique to many working women.
“The pension system was never set up for our lifetime,” Tisdale says. “This was never implemented for student loans and this formula no longer works for anyone.”
In addition to student loans, other major hurdles in retirement can include having a mortgage, car loans, and having large credit card balances.
“Any debt you have can affect your retirement. It’s important to tackle any debt you have or factor it into your investment strategy and retirement savings,” Tisdale says.
Plan your retirement and know the types of pension plans you can contribute. Find out what your challenges will be in retirement and invest to alleviate those problems.
“Take a moment and see if you’re on the right track with your investment and if you are, you shouldn’t change what you’re doing no matter what happens in the market,” Kaufman says. “But if you find you’re off track or falling behind, it’s time to chart a new course.”
Take advantage of the new digital economy to generate more revenue
If you’re reviewing your savings and investments and realizing you’re not where you want to be, it’s time to take action to catch up.
“I’ve spoken to women in their 40s who are worried about how much they’ve saved and have gotten second jobs or started side businesses so they can save more,” Kaufman says.
But it will certainly take more than telling women to save more money or earn more money. This will require a real shift in how investment and financial goals are viewed over the long term.
“It’s more than just saying save more, it’s really getting out of the traditional money scripts and ways that tell us how to make money and how to invest,” Tisdale says.
Women no longer have to turn to traditional means of earning money to increase their wealth. Fintech and the digital economy provide opportunities to build businesses and investment portfolios outside of the 401K that can be used for retirement.
“There are ways to invest now that don’t require large upfront cash investments, you can micro invest in the stock market and real estate and even when you invest small amounts of money it can turn thousands of dollars over time,” Tidale says.
Women face a retirement wealth gap which is driven by the gender pay gap and many will need to find a way to deal with the lack of savings.
“Not being ready for retirement can really lead to a financially uncomfortable retirement,” she says. “There will come a time when you won’t be able to work, so do everything you can now to build wealth and invest more, even if that means looking for ways to make more money.”
Create layered resources around your financial security.
Women should have more than one vehicle to invest. Having funds and savings spread across multiple asset classes helps reduce risk and build wealth in a safer and more stable way.
“We need to do more than save money in a 401k and a bank account,” Kaufman says.
Although women are taking charge of their finances when it comes to day-to-day expenses and saving for rainy days, it’s important to move beyond the conversation about emergency funds.
“Even if you maximize your contributions to your 401k, you can still save and invest more money and opening a brokerage account is a great way to do that. ‘a retirement fund, but you’ll also earn ‘not the restrictions,’ Kaufman says.
Be prepared to stray from the traditional. The old ways of getting to retirement don’t work, especially not for women. It’s estimated that you’ll need at least $1.5 million to retire comfortably and with the gender pay gap, women will need to invest differently to get there.
“If you stick to the same scenario, you won’t be ready for retirement. Simply working and saving money won’t get you there,” Tisdale says. “In addition to investing in retirement accounts, I would also hire a financial advisor to help you plan your investments and develop a strategy that suits your specific situation.
Be aware of what is accessible even without company links
Nearly 2 million women left the labor market during the pandemic and to a large extent have not returned. This could lead to a hiatus in investing and saving for retirement if your only means of saving was through an employer-sponsored retirement plan.
Women should consider using a Roth IRA for their retirement investments, recommends Kaufman. With a Roth IRA, money is allocated for after-tax retirement, so your investment grows tax-free.
“A Roth IRA is a good investment vehicle for those who don’t have access to an employer-sponsored retirement plan,” Kaufman suggests. “If you leave the workforce, your saving and investing for the future doesn’t have to end – you can do more than just roll your 401(k) into an IRA, you can keep saving, which will keep you on track to have what you need for your retirement,”
Everyone should take advantage of easier ways to save and invest, but it really benefits women.
“Investment apps like Tassels Where Stash are simple applications that allow you to save and invest and you can start with small amounts on a regular basis. My son actually told me about Acorns a few years ago and I started investing and that account grew quickly because I stayed consistent,” Tisdale says.
“Everyone needs to save for retirement, but for women it’s an even bigger priority because we’re literally catching up, getting paid less and living longer. We need to have the funds for financial security. later in life,” Kaufman says.