Compared to men, women have less money saved — but simple steps can help turn that around
Ensuring that you’re saving enough for retirement is a smart move for everyone, but women may want to pay particularly close attention to their saving habits. That’s because, on the whole, women have less money saved when it comes to retirement: A recent study by the Empower Institute found that women are on track to replace just 59% of their income in retirement compared to 71% for men.1
Because they earn less and live longer, women are at a double disadvantage when it comes to saving for their golden years. Fortunately, women can take simple steps today to help set them up for retirement tomorrow. It’s a matter of shifting mindsets and adjusting habits. Here are some strategies to consider, based on findings from the Empower Institute’s recent study:
Participate in your workplace plan — Even just signing up is a huge step in the right direction. Employees who participate in their workplace plan are on track to replace 25% more income in retirement than those who are eligible for a workplace plan but not participating. Getting into the habit of saving is perhaps the most important thing you can do to prepare for your post-work life – and, fortunately, it’s also one of the easiest.
Defer more — Setting aside more of your paycheck today can help set you up for a successful retirement down the road. Thanks to the power of compounding, the money you set aside early on has more time to grow in your tax-advantaged retirement accounts. A household deferral rate of at least 10% can lead to an income replacement rate of 128% — more than twice the rate of a household that defers only 3%.
Take advantage of plan features — Today’s retirement plans often come with automated features, such as auto-enrollment and auto-escalation. that facilitate savings. Auto-escalation automatically ramps up your retirement plan contributions over time so you’re saving more without having to think about it very much. Employees who use auto-escalation are on track to replace 27% more of their income in retirement than those who don’t.
Hire a financial advisor — A qualified professional can provide guidance tailored to your individual circumstances. Enlisting the help of a financial pro can help you determine whether you’re on track to save enough for retirement; if you’re not, they can assist you in changing course. That kind of assistance can go a long way toward boosting your confidence — and your savings: People with a financial advisor are more likely to have an income replacement rate that is 30% higher than those who don’t.
Put your money in buckets — Different kinds of retirement savings accounts have different tax incentives and advantages. With that in mind, it may be helpful to spread your money across a few different vehicles, such as a workplace savings plan and a health savings account (HSA).
Funding an HSA, which allows you to contribute funds to be used later for qualified medical expenses, can be particularly useful for women, who are more likely than men to be diagnosed with diseases; however these diseases are often less deadly.2
Read about more findings from Empower Institute’s study — Scoring the Progress of Retirement Savers.